Lease novation explained: how a business lease moves to another company
Novation is how a business car or van lease is legally transferred to another company. What it is, who has to agree, what it costs and how long it takes.
If you've asked your leasing company about handing a lease to someone else, you may have been told about novation. It's the legal process that moves a business lease from one company to another. Here's how it works in plain English.
What novation means
A novation replaces the original agreement with a new one. The new business takes on the agreement, including the monthly rentals, the mileage allowance and the return conditions, for the rest of the term. The original business is released once the paperwork completes.
That's different from simply letting someone else use the car: without a novation, the agreement and every payment stay your company's responsibility.
Who has to agree
Three parties are involved:
- The outgoing business, which wants to hand the lease on
- The incoming business, which wants to take it over
- The funder, which owns the vehicle and must approve the new business
The funder will credit-check the incoming business as it would any new customer. It may ask for accounts and director details, and sometimes a director's guarantee. Some funders only novate between limited companies.
What it costs
- The funder's fee. This varies: Alphabet, for example, publishes £250 + VAT for a single vehicle. Others don't publish a fee and quote case by case.
- Swap-a-Lease fees, paid by the business handing the lease on: £39.99 to list, and a success fee only if the transfer completes (two months' rental if 12 or more months remain, or one month's if fewer).
Compare that with an Early Termination Charge, which is often around half of the rentals still to pay.
How long it takes
Finding a business to take the lease over depends on how attractive the monthly rental and term are. Once you've agreed, the funder's novation paperwork typically takes a few weeks. Alphabet, for example, says to allow up to about six weeks.
Will every funder agree?
No. Some funders publish a novation process. Others consider requests case by case, and some generally won't. Our Funder Fees table shows what we know about the main UK funders, and our Funders Directory lists who's who.
Getting started
Check your agreement for the funder's name, ask them in writing whether they'll consider a novation, then list the lease on Swap-a-Lease. If you're looking to take a lease over instead, browse the transfers or post a Wanted request.