Transfer A Lease To Another

Iroshw · July 30, 2014

Hi,

I'm planning to sell my car. I have an ongoing lease at LB Finance. I also have a buyer now the problem is transferring the lease. The guarantors signed for my lease making a problem now. I checked with LB Finance and they said that transferring a lease is not possible. The guy who likes to buy the vehicle can spend only 40% of the value. Some advised to go to a lawyer and sign an agreement since the buyer can't do anything since the original book is with LB Finance. But still the same guarantors right?

I need your help to get rid of this.

Irosh

Rumesh88 · July 30, 2014

Normally you have three options.

1. Settle your lease with a negotiated penalty on the future interest (like 20%) if the buyer is availing his/her lease facility from the same company. Negotiate with the leasing company to pay you the balance.

2. Continue with the same lease agreement under "Power of Attorney". However, if the exposure is more than 50% of the actual value of the vehicle this method is not advisable. Then it is the same guarantors.

3. If you are getting a replacement vehicle under a leasing facility from the same company then you can do a "asset transfer" and release the vehicle.

These are the solutions coming to my mind.

Edited July 30, 2014 by Rumesh88

Iroshw · July 30, 2014

On 7/30/2014 at 10:04 AM, Rumesh88 said:
1. Settle your lease with a negotiated penalty on the future interest (like 20%) if the buyer is availing his/her lease facility from the same company. Negotiate with the leasing company to pay you the balance.

Could you please describe this more? Imagine the car value is Rs. 700000 and the lease amount is Rs. 400000. The balance will be paid to me in cash. Will you be able to describe this with numbers? Sorry for troubling you, but need to make this really fast as the buyer is willing to pay me an advance tomorrow.

Irosh

Crosswind · July 30, 2014

1. Get a letter from the leasing company stating the outstanding amount. You have to pay 100% of the outstanding capital. They may waive off a percentage of outstanding interest. Try to discuss with them and say that you have no way of paying the lease, you are poor now. if you can't sell the car, it will get seized etc. etc. If you do it right, you can get about 90-95% of future interest waived off.

2. Give the letter to your buyer's leasing company.

3. Buyer's leasing company will issue a delivery order to your leasing company. If there's a difference between the current outstanding amount and the buyer's lease amount, that needs to be discussed with the buyer's leasing company.

4. based on that delivery order, you can get the book released to the buyer's leasing company.

Alternatives:

1. ask the buyer to go for a lease from the same company

2. ask a loan from a friend, settle the lease, take the car out and sell it to the buyer

Iroshw · July 31, 2014

Complicated. What I'm thinking, let the buyer continue my lease. And planning to sign an agreement front of a lawyer regarding the matter. Will it be a problem for me in the future or for my guarantors? Only 16 installments pending. Guys, what is your advice?

Irosh

Edited July 31, 2014 by Iroshw

asrock · July 31, 2014

On 7/31/2014 at 2:33 AM, Iroshw said:
Complicated. What I'm thinking, let the buyer continue my lease. And planning to sign an agreement front of a lawyer regarding the matter. Will it be a problem for me in the future or for my guarantors? Only 16 installments pending. Guys, what is your advice?
Irosh

I have done this for my previous car. But that was with a close friend, he promised to continue my lease. So far so good, about 20 more installments to go. But the bank informs me when the payments are delayed, its annoying some times.

and there are risks, if he doesn’t pay the installments, you will have to goto courts with the bank because the car is still under your name. Same goes if the car gets involved in a major accident or some kind of illegal business. Also I think according to some lease/hp agreements the bank doesn’t allow you to transfer the lease/car to someone else in anyway. All and all I won’t advise to do this if the buyer isn’t a well known person.

Crosswind · July 31, 2014

On 7/31/2014 at 2:33 AM, Iroshw said:
Complicated. What I'm thinking, let the buyer continue my lease. And planning to sign an agreement front of a lawyer regarding the matter. Will it be a problem for me in the future or for my guarantors? Only 16 installments pending. Guys, what is your advice?
Irosh

Possible scenarios

1. Buyer doesn't pay the installments - car gets seized, your name gets nicely displayed in CRIB along with your guarantors unless you pay through your nose and get the car out.

2. Buyer crashes the car - if the problem is severe enough to go to courts, car gets impounded. Buyer will not pay the lease. Leasing company takes action against you.

3. Buyer uses the car to do drug business/mobile prostitution business/etc. - Police will pay you a visit and make you a guest of the state prison

Watchman · July 31, 2014

On 7/31/2014 at 2:33 AM, Iroshw said:
Complicated. What I'm thinking, let the buyer continue my lease. And planning to sign an agreement front of a lawyer regarding the matter. Will it be a problem for me in the future or for my guarantors? Only 16 installments pending. Guys, what is your advice?
Irosh

Well, I think you should be asking your garuntors that question rather than a bunch of guys on the internet. We're not the ones getting black-listed if things go south.

Firstly, ask your garuntors if they are OK with it. That's the decent thing to do. Whatever other risks you take (mentioned by crosswind) are your own.

The Don · July 31, 2014

On 7/31/2014 at 2:33 AM, Iroshw said:
Complicated. What I'm thinking, let the buyer continue my lease. And planning to sign an agreement front of a lawyer regarding the matter. Will it be a problem for me in the future or for my guarantors? Only 16 installments pending. Guys, what is your advice?
Irosh

You should not do it. Why do you want an ongoing financial arrangement with your buyer?

The best course of action as some has already suggested is

1. Introduce the buyer to LB Finance and get him to obtain a lease with LB, and then ask LB to consider waiving penalty for your lease, and settle the lease with LB yourself, and let the buyer have his own lease with LB. Fairly straight forward and good for all parties including the finance company who won't suffer a loss of business.

2. Get the buyer to find his own lease, once its there, settle your portion of the lease and ask LB to transfer the vehicle to other finance company

Signing documents in front of lawyers is frankly meaningless. Because in reality there are multiple parties in this agreement and only your liability and the buyers liability is being covered by this agreement. We have gurantors and the finance company as well. Trying to find short cuts will only result in complications for you later......

asrock · August 3, 2014

Also it seems like you will get listed in the CRIB if the other party does not pay the installments on time, and it will probably be a problem when you are trying to obtain a loan.

NILANTHAG · August 5, 2014

Even the buyer pays the lease on time, if you go to a bank for a new loan, they will consider the lease rental commitment as a financial obligation of yours and might reject the loan saying too much financial commitments as banks will not usually exceed 40%(or 60% not sure) of income as loan payments

asrock · August 6, 2014

On 8/5/2014 at 5:36 PM, NILANTHAG said:
Even the buyer pays the lease on time, if you go to a bank for a new loan, they will consider the lease rental commitment as a financial obligation of yours and might reject the loan saying too much financial commitments as banks will not usually exceed 40%(or 60% not sure) of income as loan payments

Yeah thats true. But the original bank I got the lease from agreed to give a seccond lease (full lease) without considering the 1st lease.