How to Sell a Leased Car
Leasing is a popular way to get behind the wheel of a brand new ride quickly. They offer a short commitment and relatively low payments, but what if you need to sell the car before your lease term is up? The good news is that it’s completely possible to sell a leased car, and it can even be a profitable experience for you in the right situation. That said, there are plenty of things you’ll want to keep in mind during the process, so let’s take a closer look at how to sell a leased car.
What is a Lease?
When you’re car shopping, you have a few options for how to pay for your purchase. You can purchase the vehicle outright, with cash or certified check, which means you own it without any strings attached from day one. You can take a loan to pay for the car and make regular payments for a set period of time with a set interest rate, or you can lease the vehicle.
When you lease a car, you agree to make a down payment and then regular payments for a set period of time. Unlike a loan, you do not own the vehicle at the end of the term and must return it to the dealership. Leases are popular because they offer shorter terms than loans (2-3 years in most cases) and lower monthly payments. They are not ideal for everyone, however, because they do not offer a direct path to ownership.
Deciding to Sell a Leased Car
New cars are exciting, but the honeymoon period doesn’t last forever. Sometimes, you fall out of love with your car or need to get rid of it for other reasons. Perhaps your finances have taken a hit, or you happen to be moving to a city with wonderful public transit offerings. Regardless of the reason, you’re not without options if you find you want to sell a leased car. It’s not the easiest or least expensive way to get rid of a car, but it is possible and can be profitable in the right situations.
What is Residual Value?
When you lease a car, one of the factors that impacts your monthly payment amount is the residual value. The term refers to the value of the vehicle at the end of the lease term, and the amount is determined at the start of the lease. In other words, how much will the car be worth after you’ve owned and driven it for two or three years? Cars that hold their value well will have a strong residual value and may have lower monthly lease payments as a result.
That said, residual value is a pivotal data point in your quest to sell a leased car. If the car’s market value (what you can sell it for today) is not equal to, or greater than, the residual value (included in the buyout price), you’ll be on the hook to pay the difference if you decide to sell. If the market value is greater than the residual value, you may end up with a bonus payout when you sell.
Finding Your Buy Out Price
Your buyout price is the total amount that you have to pay to walk away from the lease with the vehicle in hand. The number includes the vehicle’s residual value, plus any fees or other charges. You can find your buyout price by contacting your lender or by logging into your account. It’s usually listed alongside information such as monthly payment residual value.
Current Market Value
Current market value is the approximate price that you can expect to get when selling your car. Online tools from Kelley Blue Book and NADA are among the most widely used and popular options, but there are many others. The thing to remember is that valuation tools provide a rough price, but they are not set in stone and can be highly variable depending on the vehicle’s condition and equipment.
Finally, be as accurate as possible when entering information at this stage. So many factors impact value that even a small mistake or missing information could make a big change to your estimated value.
Possible Exit Strategies
Once you’ve done your research and understand the value and payoff amounts, you have a few options for where and how to sell your leased car. Make sure to check with your leasing company to make certain there are no third-party restrictions and that you have permission to sell the car. There will be a few fees involved with this process, to make sure to ask questions and understand the lease terms clearly before you move forward.
Dealership
Selling to a dealer is the easiest way to unload a leased car. Dealerships have specialized staff to handle paperwork and the financial side of the transaction. They understand the process and are typically much faster to deal with than selling to an individual, because there’s no waiting for payoffs to clear and no confusing transferring of ownership or paperwork.
That said, there is a price for this convenience. Dealers are businesses, so they have overhead for staff, buildings and utilities, taxes, and more. They have to earn as much profit on each transaction as possible to keep the lights on, so there’s little chance of you gouging a dealer for more money on your sale.
Individual
If you’re willing to put up with a little hassle and the potentially awkward personal interactions with a stranger, selling to an individual can net you the best price for your leased car. You can set your asking price much higher than if you were selling to a dealer, and there’s typically more room for negotiation with a person.
There are a few notable downsides to selling this way. The big issue with selling a leased vehicle to an individual is that there can be considerable wait times and delays with paying off the lease and transferring the title. Once the person has paid you, you’ll then have to send that money to your financial institution and wait for the buyout to clear. In the meantime, your buyer has shelled out thousands of dollars for a car that isn’t completely theirs yet. None of that means that selling to a person is impossible or even all that difficult. It just means that you and your buyer will need to be flexible and set reasonable expectations for the sale.
Online Car Buying Services
Online car retailers have become a big deal in recent years, as people seek to avoid buying in person and sidestep pushy salespeople. Sites like Carvana and even physical retailers like CarMax buy leased cars, and Carvana will come pick it up at your house. Again, the ease of these transactions comes at a price so don’t expect to get top dollar.
Consider Buying the Car
If you like your car but just want to get out of your lease, consider buying. You can buy the lease out, either with cash or financing with a bank or credit union. Depending on the terms of your lease, you may be subject to fees or other charges, the same as if you were selling the leased car.
Possible Ways to Return Your Lease without Penalty
You may have options to return the leased vehicle early without a penalty, but that’s not true in the vast majority of cases. That said, you may be able to get around the fees if the value of your car is greater than the buyout amount. That overage can be enough to cover the penalties and may put a little extra cash in your pocket at the same time. Another option may be to return the car to a dealer and purchase a new vehicle at the same time. You may be able to negotiate the payment of fees conditional upon the purchase of a new car.
Read more on How to Sell a Car here.
