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Escaping a car lease gets easier

For years, leasing a car put you at risk of a major downside -- being stuck with a vehicle you no longer wanted with no way out. You got hit with a hefty penalty if you tried to break the lease.

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Now there's a way to overcome that obstacle.

The lenders haven't stopped imposing those penalties, but middlemen who facilitate lease trading among consumers are reshaping the car leasing market by matching car lease sellers with buyers.

For a fee, these lease-trading companies act as online matchmaking services for both sides of the lease-trading transaction. Once a deal is struck, the lease-trading company facilitates the transfer of the lease and title with the lender.

The lease-trading market is appealing to sellers looking to dump leases for whatever reason: the desire for other models, financial setbacks or overseas moves. For buyers, there are some great short-term deals available from sellers looking to avoid those hefty penalties.

"Car leases are extremely hard and costly to break, so these sites were created to give sellers an out," says Philip Reed, senior consumer advice editor with Edmunds.com. "For buyers, these sites help them negotiate the complex legalities involved in assuming a lease. It's a situation where everyone involved benefits."

How it works
If you're interested in trading leases, you can work through an established lease-trading company such as LeaseTrader.com or Swapalease.com, or go it on your own through sites such as Craigslist or eBay. When working through a lease-trading company, both buyers and sellers pay a fee during certain points in the transaction.

The lease-trading companies vary in their fee structures. For those interested in assuming a lease (the buyers), Swapalease charges initial fees ranging from $39.95 to $79.95, while LeaseTrader.com charges range from $29.95 to $129.95. LeaseTrader.com also charges the buyer and the seller a $149.95 transfer fee. For sellers who work with Swapalease, there is a $45.95 initial listing fee and a $95 "success" fee when an agreement is reached between the buyer and seller regarding a lease transfer. If the agreement should fall through, Swapalease will credit the seller with the $95 toward a future lease transfer transaction.

Individual car companies and banks charge transfer fees in addition to those charged by the lease-trading companies. A list of fees those fees can be found on the Swapalease site. These fees vary but could be $45 for a lease transfer for Toyota, $595 for General Motors Acceptance Corp., $250 for Wells Fargo Bank and $75 for Ford. Some car companies and banks also charge a credit application fee.

In most cases, these fees are far less than those charged by car dealers and leasing companies to get out of a lease. If you terminate a lease early, most leasing companies -- who work through car dealers -- will require you to pay the rest of what you owe on the lease, plus early termination fees, or force you to purchase the vehicle. Generally, lease contracts treat all early terminations the same way, regardless of the reason for the termination, including the death of the leaseholder, a job loss or a move to a foreign country.

Next: "Would-be buyers without good credit are usually out of luck."
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