Online auto lease-swap market grows
When Hollywood scriptwriter Scott Nimerfro needed a car to bridge stints between his job in Los Angeles and his home in Cottage Grove, he didn't bother cruising car lots. Instead, he went to LeaseTrader.com and took over the remaining lease on a 2008 BMW from a total stranger.
The short two-year lease gave him the snazzy car he craved without a long-term financial commitment.
As the recession stubbornly digs in, Nimerfro is on the cusp of a rising trend. The trading of car leases is growing in popularity as more lease holders opt to exit contracts because of job losses, salary cuts and general cost cutting, say online service firms such as LeaseTrader.com and swapalease.com, which match trading partners on the Internet for a fee.
"In the fourth quarter of 2007, the No. 1 reason people were getting out of a car lease is because of a mortgage situation. Today, the No. 1 reason is because of job loss," said John Sternal, marketing vice president for the Miami-based LeaseTrader.com.
With the nation's unemployment rate spiraling to 8.1 percent and monthly lease payments averaging $620 last year and $570 this year on mostly luxury cars, people are gunning for relief.
According to CNW Marketing Research Inc., Americans leased about 9 million cars last year -- about 19 percent of new car deliveries -- with leases averaging 39 to 48 months. For some, that's just too expensive in this time of economic crisis, said CNW researcher Art Spinella.
"We have found that most of the people who are swapping auto leases would prefer not to," Spinella said. Yet lease swapping "has doubled and the people who use (an online service) for the most part are pretty happy with it. It's easier to find. Four years ago, it was impossible to find them."
LeaseTrader spokesman Evan Sneider said, "We did 20,000 transactions nationwide in 2006, 35,000 in 2007 and we exceeded 45,000 in 2008. This year we are tracking to be above where we were last year."
LeaseTraders's online lease postings jumped about 30 percent last year nationwide.
Minnesota saw "a 38 percent increase compared to a year ago," Sneider said.
Economists note that the trend is not surprising, given that 18,500 Minnesotans lost their jobs in January and another 13,300 in February.
Many people are racing to cut expenses and so gladly forfeit their leases. At the same time, short-term leases are still attractive to those with secure jobs. Those coveting fancy cars can get their wish without the need to plop down a huge down payment. And some trades come with carrots: financial incentives to entice takers. Combined, all these factors fuel the trend, industry officials note.
Parties frequently work out special arrangements between themselves once they connect. Incentive payments are not uncommon because they entice people to take over existing leases, said Scot Hall, executive vice president of operations for Swapalease.com, the Cincinnati-based firm that charges $50 to $150 to list vehicles on its website.
He cautioned leaseholders to recognize they must obey all lease-swapping terms set up by the lenders and auto manufacturers that actually own the vehicles. Most of these companies charge a fee to change the names on the lease papers. Hall said he has found a few online swapping services claim they can circumvent such fees. But he suggested caution. If leaseholders don't properly follow the terms of their contracts, they can breach their contract and may end up in a legal quagmire.
Steve Lovell said he has no regrets. "The service worked well and the end result is that we are in a better situation for our family."
About 13 months ago, Lovell leased a 2008 BMW 328 Xi for three years, but he soon realized he only drove the car about 6 miles a day. Meanwhile his wife, two kids and dog were piling into a seven-year-old car with 90,000 miles. "As much as it pains to let the BMW go, you swallow hard and you do the right thing. It worked out," Lovell said.
After a buddy told him about the Web site, Lovell logged onto LeaseTrader.com and paid $79 to list the leased BMW on the website with pictures. He waited.
Two weeks later, he got an e-mail from Nimerfro saying he would like to take over the $500-a-month lease.
Nimerfro and his wife tried for months to be a one-car household after his old car lease expired and he returned the car. With three kids, one car soon became old. "We thought ... that we could be really green," said Nimerfro, one of the screenwriters of the TV-series "Pushing Daisies." "But I found myself getting stuck home when I had a meeting. For a minute you think you really can do it and can ride a bike. And then you think, 'Hey it's winter. I'm not riding my bike.'"
So he logged into the Web site, liked what he saw and paid LeaseTrader $150 to have his credit checked. Days later, he assumed the lease and is thrilled to have a nice car at his disposal.
"The Web site was pretty easy," Nimerfro said.
Aside from the fees to LeaseTrader, Lovell and Nimerfro decided to split a $500 lease assumption fee BMW charged.
"The other guy just wanted to get out of the lease, so he agreed to pay half just so he could get out of the lease," Nimerfro said.
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