What is a Car Sublease Agreement?
An auto sublease agreement is a contract or agreement between a lessee (the person responsible for the vehicle) and a third-party (sub-lessor) that allows the third-party to take possession of an auto or other vehicle leased by the original lessee. When a lessee finds a sublessor, they enter into a similar leasing agreement, giving the sublessor the right to use the vehicle. The sublessor assumes responsibility for the regular payments for a predetermined period of time. After this time, the lessee takes back possession of the vehicle, and the lease returns to normal.
The purpose of an auto sublease agreement is to provide a way out of a lessee’s current lease when they no longer want or can afford the vehicle . It allows someone else to assume the necessary payments for a period and, effectively, buy the remaining time on the-month-to-month leasing agreement or fixed-term leasing agreement.
Because most leasing companies won’t allow a lessee to break their leasing agreement, an auto sublease agreement is a good way to unload the remaining time without facing a fine or termination fee. The lessee may still be responsible for paying any initiation or transfer fees to the leasing company at the time that they break the current leasing agreement; however, these are typically much lower than the fee for outright terminating the agreement early.
Components of an Auto Subleasing Contract
A sublease agreement is a contract between the tenant and a third party that allows you to sublet your property for part of the lease’s term. Many times, tenants who want to sublet are moving away temporarily or need a way to pay rent through a series of job relocations.
Essentially, a sublet transfers the tenant’s rights to the desired space for an agreed-upon period of time between the tenant and the new party. Since the tenant is not the property owner, any instance of violation of the lease’s contractual obligations could result in the eviction of the original tenant, the sublet tenant or both.
Essentially, a sublease goes into effect when the following information is included:
Without all signed parties and descriptions of conditions, it is an incomplete contract and may not be enforceable.
Advantages of Subleasing Your Vehicle
One of the most significant benefits of an auto sublease is cost savings. The monthly car payment that a sub-lessee is responsible to the original lessee is typically lower than what the original lessee would be required to pay if they continued to keep the car. For example, let’s say that a person leases a car for $300 a month. After using the car for a few months, the original lessee may realize that they cannot afford the car – either the original person’s lease has ended or they are unemployed. However, they are in a good position to save some money: they are able to have someone else take over the lease, saving as much as $200 per month, and they can avoid being responsible for additional depreciation costs, taxes and "wear and tear" if they return the vehicle early to the leasing company. A second significant benefit of auto subleasing is the flexibility that it offers the sub-lessee. A sub-lessee for an auto sublease agreement is not responsible for any of the onerous requirements that an auto lease can impose, such as meeting a minimum number of miles per year or paying lots of money for going over the allotted mileage specified in the lease. Finally, auto subleasing can create some flexibility for the original lessee. A person who is suddenly unable to continue to afford the car for some reason – including losing their job, relocation, death, divorce, etc. – can quickly and easily sublease the vehicle to someone else through an auto sublease agreement instead of simply returning the car to the dealership. It is also possible for those who want to switch to a cheaper car but are in the middle of a lease to seek an early termination by subleasing the car on the market. This added flexibility allows for greater freedom in the marketplace to sublease and resume a car lease as soon as possible.
Legal Issues and Challenges
As with all legal issues, there are certain considerations. You must be aware of the liabilities you are creating for yourself, and whether you have permission from those who you must receive it from, or if you do not. The biggest consideration of auto subleasing is liability. In general, the auto sublessee is just a temporary guest driver of the sublessor’s vehicle – hence the term "sublessee". So, if the sublessor is involved in an accident during the time of the sublease, and the owner of the sublease wants to go after the person who caused the accident he or she can go after the owner of the vehicle and the person or company listed on the insurance. But it may turn out that the lease holder sublet the vehicle to someone that caused the accident. If the auto sublessee is registered and insured driver of the vehicle and all the paperwork is filed properly, the sublessor is protected. The document itself should allow the lessee of the original lease and the insurance holder (if different) to limit the liability to only the sublessee. Therefore, if the sublessee is the one at fault for the accident, the original lease holder and insurance holder can use a lawyer to fight for them and present case law that states that they were not at fault for the accident. Doing so releases them from liability and allows them to resume their life as normal without the "death sentence" of having to pay for medical bills and damages to other parties involved in the accident. Altering the document will void any protections that would otherwise protect the sublessor, potentially opening you up to even greater liability. Altering the document could be considered fraud and it could be used against you in a court case in which you will have to prove that you acted in good faith. This does not mean that you are off the hook in such circumstances, it means that you are also protected from liability, if you did everything by the book. If you are not insured and registered, you will be considered as trespassing and therefore liable for whatever damages the accident caused. Perhaps the person listed on the lease is a spouse, family member or friend and covered by the lease holder’s insurance policy. Perhaps there is an arrangement that you make between yourselves where they compensate you directly for damages. In both cases, you have limited your legal options by not informing the insurance holders of the new users of the vehicle. If the lease holder or the insurance holder challenges you in court over the accident, you will need to both provide evidence to support your claim. Additionally, you are putting the lease holder and their insurance at risk by allowing someone drive a vehicle when it is out of policy. The courts will then have to determine whether the family member or friend was legally insured and registered to use the vehicle. Without sufficient evidence, such claims will be denied. Be sure to include that everyone is of appropriate legal age to drive, and that he/she are not breaking any laws. This includes driving drunk, which all sublessee should agree to and sign a waiver of liability for. Be very careful, however. On all leases, you have to expressly obey all laws of the state where the vehicle is registered and titled to. There are laws in place to ensure that those who rent out apartments and homes cannot discriminate against certain people. These are not always the same for auto leasing. You may need your state and federal laws section from a qualified auto lawyer so you can review the paperwork before signing.
How To Legally Sublease A Car
Subleasing a vehicle doesn’t require anything more than transferring the vehicle to someone else in exchange for payment. If you’ve had trouble making your payments, subleasing your vehicle instead of selling it or returning it to the dealership can help you recoup some of your investment and get back on your feet. If you’re considering subleasing your vehicle, be sure to know the rules and requirements prior to moving forward with that decision. Simply creating a contract and picking a payment schedule isn’t enough to protect you from the repercussions that can come with an illegal or irresponsible sublease. If you want to sublease your vehicle in a proper way, take the following steps to protect yourself: The most important step to subleasing your vehicle in a legal way is getting your lessor’s approval. An auto lease agreement includes the leasing company’s right to approve or deny any potential lessors. Unless the leasing company explicitly approves the transfer, there’s a good chance they’re going to object, in which case they may attempt to collect the remaining dues in full. While you may transfer the vehicle without penalty if the leasing company is okay with you doing so, you’ll still be required to pay off the vehicle at the end of the term. In other words, you’ll remain responsible for any unpaid amounts even if the vehicle is no longer in your possession. To informally keep this from happening, many individuals try to "give them back" even if they haven’t been approved. While this can oftentimes work, if your leasing company notices they have a new driver or that the driver has gotten any traffic tickets, they can go after you for payment. Once you have your lessor’s approval, make sure you get the approval in writing so you can prove your lessor is aware of the sublease should they ever need to prove it in court. You’re also going to want to make sure that the sublease is included in your list of vehicle leases with your insurance company , since you’re both technically responsible for the vehicle. Once the lessor and insurance company are both prepared for your sublease, draft a formal sublease agreement that includes all of the following provisions: The sublease agreement is the only legally binding way for you and your sublessee to hold each other accountable, so if the sublessee ever claims they paid off the amount of the lease, you’ll be able to inform the court the amount was paid incorrectly. If, on the other hand, they claim you never actually owned the vehicle, your contract will be able to prove otherwise. If your dealership has some sort of policy against subleases, follow those policies to the letter. You might not prefer having to go through the extra work to complete your sublease, but it could come with a number of benefits, so don’t overlook it just because you’re worried your sublessee will suddenly back out. Even if you believe you’ll be able to find someone you can trust to drive your vehicle, plan for the likelihood that they’re not responsible enough to keep it insured, follow the vehicle’s rules and maintain good standing with your lessor. If your vehicle’s a lemon or repair costs have happened then this person might not want the vehicle anymore. Make sure to do thorough routine checks to confirm that the individual is performing their responsibilities. If they neglect maintenance and are far worse at monitoring it than you thought, your only course of action may be to file a small claims lawsuit against them to recover your costs. This might not always be possible, so be sure to double-check that your state allows for subleases and what the process is. States such as California, for example, allow for subleasing as long as you have the lessor’s permission and the sublease doesn’t extend for longer than six months.
Common Pitfalls
One of the biggest issues we see when it comes to auto subleasing is carriers or brokers thinking: "I’m a good negotiator, so let’s have a verbal agreement." Or even worse, someone tells them "We’ll get it on the books later." That’s a bad habit that too many people fall into. The problem with handshake verbal agreements is that they’re only as good as the words being spoken. You don’t have a piece of paper saying what you verbally agreed to, and you can’t go back and read the contract because there isn’t one. So don’t agree to transport someone’s load unless you have something in writing. Make sure you have everything in writing, because if something goes wrong and you don’t have proof to the contrary, somebody’s going to get burned.
One of the most common mistakes we see is brokers waiting until after the fact to talk to the carrier. The carrier has picked up the load and it’s on the road, and only then do they get a call from the broker saying there’s a problem with the paperwork. But it’s already been signed by both parties, so they end up having to put it on file for the audit anyway. Carriers and brokers need to talk before those documents are signed. It can save everyone a lot of time and effort, and it’s also the right way to do business.
Another common error is the client not being clear about the cargo being shipped, or what equipment is required to haul the load. You can avoid this by thoroughly discussing loads with your broker or shipper. Make sure you communicate with your carrier in advance. Otherwise, if equipment is damaged because your carrier thought the cargo was supposed to be temp-controlled, but it wasn’t, or if the crew wasn’t properly trained for the type of equipment, then you missed an opportunity to vet your carrier and you’re stuck with a shipment that’s damaged or even a potential double-dipping lawsuit.
One other thing to keep in mind is what happens when cargo is released at a facility without an appointment. The carrier doesn’t scan the bill of lading, and when the audit comes back asking to specify who released the cargo out of their custody, the carrier can’t do it. Or worse, there was an appointment and they didn’t show up on time, so the load wasn’t accepted. Or you call the carrier and he says they came three hours early, but the broker says they came when they were supposed to and they simply missed the appointment. A lot of times people don’t take nuisances as seriously as they should, but these are why you absolutely need to have a contract in place beforehand. Having an appointment is a term of the contract, and if you miss an appointment or fail to show up at the time when the product needs to be delivered, you’re failing to meet a term of the contract. The late fees associated with breaking a contract can be pretty severe, so you want to make sure everyone is on the same page beforehand.
Conclusion And Additional Information
In conclusion, auto sublease agreements are an excellent way to mitigate risk for those directly involved in a lease agreement. They transfer responsibility for all damages that may occur to the car to the person using the vehicle. Auto subleasing is the process of leasing a car from someone who is already the on the lease agreement of a car. Depending on the circumstances they might be responsible for damages, excess wear and tear, or UI charges.
If you have an active auto sublease, you should keep the following in mind:
• Return your car on time
• Always make your payments on time
• If you have a problem with the car , resolve it immediately
• Keep service records in order
• Stick to driving limit agreed upon
• Make repairs on your own if you are at fault
• Read all paperwork carefully before signing it
• If your sublease is terminated, return the vehicle immediately.
Finally, those individuals who are deciding whether or not to enter into a sublease agreement should carefully consider the following:
• If you do not have a good driving record, don’t become a sublessor
• Find out the leasing company’s policy on subleasing cars
• Make sure that the person you are subleasing to is responsible and trustworthy
• Get everything in writing
• Maintain a positive relationship with lessor and make payments on time.