Assignment of a Car Lease Agreement: How to Transfer the Agreement to Another Person and What Is Required to Do So

Due to certain circumstances, a lessee may find it difficult to make lease payments for a car taken on long-term rental. But this does not mean you have to terminate the agreement right away and pay large penalties. An alternative solution can be car lease assignment. In this article, we will look in detail at what the process involves, how much it costs and when it makes sense.

What Is a Lease Assignment in Simple Terms

Lease assignment is a legal procedure for transferring an existing lease agreement from the current lessee (the original client) to a new one. In this case, the car itself remains the property of the leasing company. Only the party that uses it and makes regular payments changes.

A car on lease is re-registered in this case as follows:

1. The original client informs the leasing company of the need for a lease assignment.
2. The lessor looks for a new client, checks their solvency, re-issues the payment schedule, CASCO and grants official permission for a change of party in the contract.
3. The original lessee is fully released from financial obligations and hands the car over to the new user.

In this case, the new lessee receives the vehicle without having to make a down payment. They only need to make monthly payments and pay the residual value.

When Car Assignment Makes Sense

Most often, assignment happens because of changes in the original client's life circumstances. It is quite appropriate when facing financial difficulties, business reorganization or a change of residence, for example when moving abroad. Re-issuing the contract helps avoid arrears, penalties and forced repossession of the car.

Sometimes a client simply wants to get an operating lease in Ukraine for a higher-class or more modern car. In that case, assignment is also quite appropriate. You can fully close the current contract without paying a penalty for early contract termination and take another vehicle on long-term buyout.

It is worth noting that car assignment is very beneficial for the new client. They get a verified car without having to make an initial down payment of 20–30% of the vehicle value. The monthly payment is usually lower in this case.

How Much Does Assignment Cost and What Are the Risks

Re-registration of the car to a new lessee usually involves the following costs:

1. Leasing company fee for re-issuing. An administrative fee for reviewing the new client's documents, updating registers and re-concluding the contract. It can be a fixed amount or a percentage of the remaining debt.
2. Re-issuing insurance policies. Amending the existing CASCO and compulsory third-party liability insurance contracts due to the change of the main driver.
3. Technical diagnostics. An independent inspection of the car at a service station to record the current condition and mileage of the vehicle.

However, keep in mind that the leasing company may refuse to transfer the car to a new lessee, for example because of a poor credit history or insufficient income. In addition, disputes about wear may arise during handover. In that case, the parties have to agree on compensation.

Alternatives: Early Termination or Buyout

If car lease assignment is not possible for some reason, you can simply terminate the contract and return the car to the leasing company. But keep in mind that penalties may be charged for early termination.

You can also consider buying out the car and selling it afterwards. In that case, you will have to pay the residual value of the vehicle under the contract, register it as your full property and sell it yourself on the secondary market. This way you can recover part of the funds invested.

FAQ 

Can I make a car lease assignment without the leasing company's consent?

No, this is strictly prohibited.

What is a lease assignment and how is it different from selling a car?

When a car is sold, the legal owner of the vehicle changes. Car lease assignment involves only the transfer of the right of use and debt obligations.

Who pays the remaining payments after the car assignment?

From the moment the agreement is signed, the obligation to make monthly payments passes to the new lessee.

How long does car lease assignment take?

On average, the procedure takes 3 to 10 days.

Can the assignment be made to an individual if the contract was concluded with a sole proprietor (FOP)?

Yes, this is entirely possible.