How a Lease Takeover Impacts your Credit Score in Canada

When it comes to doing a lease takeover, there are two (at least) people involved and a transfer of debt. In case you don't know it, all car lease contracts are treated as a loan, from a Credit perspective: the auto company gives you a brand new vehicle in exchange for your promise to pay a "loan" on a regular basis for the entire duration of the agreed term. It is also known as an installment. Now, how does it affects your Credit Score?

From the New Owner Perspective

When you take over a lease, it is the exact same process (Credit related) as if you were leasing or financing a brand new vehicle. The dealership, on behalf of the manufacturer financing entity, needs to make sure the client is creditworthy to be granted with such a vehicle and contract. These are the basic steps:

  1. You get an offer from a Salesperson.
  2. You sign a Credit Check application to allow the financing entity to run a verification.
  3. About 48h later, you receive either a confirmation or a follow-up.

On the specific case of a lease takeover, the new owner will assume the remaining installment until this is finally paid in full.

From the Old Owner Perspective

Transferring your car is an actual relief, no matter how. The fact you have the need to get your lease transferred and later reaching to the point where you found someone, you delivered the car and the contract is already in his hands, doesn't mean directly that you are clear.

Yes, no more updates will be posted into your account regarding the installment, but it will remain as a record in your account for at least one year until TransUnion® and Equifax® algorithms exclude it from your debt and it doesn't appear anymore

For example:

If you transfer your lease with Nissan Canada Finance to a new owner, the lease will still appear in your credit records (and credit score) for the next 12 months. Only after a year has been completed since NCF stopped reporting the last update, the installment will be considered as completed and won't be taken into account anymore to calculate your "debt".

If you are looking to transfer your lease contract or to take over an existing one, feel free to jump into our Lease Takeover Marketplace.

About the author

Jorge Diaz is a passionate car lover, winter driver & Software Engineer. For the last 10 years, he has built Online Solutions used by more than 5,000 companies across the globe. He founded LeaseCosts in 2016 with the purpose of simplifying and helping people to better understand the complex market of new vehicles in Québec and Canada. You can connect with Jorge in LinkedIn or send him a direct message.