How to Sell A Leased Car

There are usually two options that people consider toward the end of their car lease. The first is bringing the car back to the dealership, which is what most people decide to do. The second option is buying the vehicle for the agreed upon buyout price in the lease. But there’s also a lesser-known third option available: selling the car.

That’s right–it is possible to sell a car you are leasing. How does it work and more importantly, is it the right option for you? Here’s everything you need to know about how to sell a leased car:

Leasing Terms You Should Know

There are several terms you need to know before you can understand how to sell a leased car, including:

• Residual value: This is the estimated value of the car at the end of the lease. The leasing company calculates this value at the start of your lease. This estimate is based on multiple factors, including market conditions, expected demand, the car’s reliability, and resale value. You can find your car’s residual value in your leasing agreement.
• Buyout price: This is the amount you have to pay in order to purchase your car, which would end your leasing agreement. The buyout price is typically equal to the sum of the residual value and all remaining payments on your lease. You will not find the buyout price in your leasing agreement, so you will need to call your leasing company for more information. 
• Market value: The market value is how much someone would pay to purchase your vehicle right now.

What Happens When You Sell A Leased Car?

You can choose to sell your leased car to a private party or dealership. The process of selling a leased car is the same regardless of the buyer. Here’s how it works:

1. The buyer, either a dealership or private party, pays you the agreed upon price to purchase your vehicle. 
2. You use this cash to pay your leasing company the buyout price, which will end your lease agreement.

That’s all there is to it. If you are able to sell your leased car for more than your buyout price, you can pocket the difference. But if you sell your leased car for less than the buyout price, you are responsible for paying the leasing company the difference. 

Can You Trade In A Leased Car?

Yes, it is possible to trade in a leased vehicle. Trading in a leased vehicle is similar to selling a leased vehicle to a dealership. Here’s how it works:

1. You give your vehicle to the dealership in exchange for an agreed upon trade-in price.
2. You use the cash from your trade-in as a down payment on a new car.
3. You pay the leasing company the buyout price of the vehicle, which will end your lease agreement.

The only difference between trading in a leased car and selling a leased car is what you do with the cash. You will need to pay the leasing company the buyout price regardless of whether you sell or trade in your vehicle.

However, if you sell your car for more than your buyout price, you can keep the extra cash. If you trade in your car for more than the buyout price, you can use the difference as a down payment on your next vehicle.

Why is Now A Good Time to Sell A Leased Car?

Now is a good time to consider selling your leased vehicle. Why? Used car inventory is incredibly low right now due to several factors.

The first is a computer chip shortage, which has disrupted the production of new vehicles. Because there are fewer new cars available, more consumers are purchasing used cars, which has drastically lowered inventory. Plus, fewer customers are trading in used cars in exchange for new cars due to the shortage.

Furthermore, rental car companies typically supply most used cars on the market. However, rental companies have been unable to buy new cars for their fleet due to the shortage, so they aren’t getting rid of as many used vehicles.

These factors have led to a shrinking inventory of used cars. Because it is so hard for dealerships to find used cars to resell, they may be willing to pay a higher price for your leased vehicle if it is in good condition.

This means you may be able to sell your leased vehicle for a price that is greater than the buyout price. If so, you can keep the difference and potentially earn thousands of dollars in profits.

How to Determine if Selling Your Leased Car is Right For You

If you’re thinking about selling your leased car, it’s important to do the math to determine whether you will make a profit from this transaction. This way, you will know whether selling your leased car is worth it. Here’s how to figure this out:

1. Find the residual value. Remember, this value is established at the time you enter your  lease, so it should be included in your lease agreement. The value of used cars has skyrocketed lately, which means the residual value estimated by your leasing company may be too low.
2. Determine the buyout price. Contact your leasing company to find out the buyout price. You can also get a rough estimate of your buyout price by adding the residual value and the remaining lease payments together. For example, if the residual value is $15,000 and you still need to make $5,000 in lease payments, the buyout price would be roughly $20,000.
3. Estimate the market value of your car. Now you need to know how much a dealership or private party would pay for your vehicle. You can request quotes from local dealerships to see how much they would be willing to pay for your vehicle. You can also use a free online tool or research what other similar vehicles are selling for in your area.
4. Calculate your profit. Your profit is the difference between the market value and buyout price of your car. For example, if the market value is $25,000 and your buyout price is $20,000, you could potentially make a $5,000 profit by selling your leased vehicle.

If you can profit off of your leased vehicle, you may want to consider selling it. But if not, you may want to hold onto it until the end of your lease.

How to Get Around Third-Party Buyout Restrictions

Read the terms of your lease agreement to see if there are any third-party buyout restrictions. Some leasing companies prohibit all types of third-party buyouts, whereas others simply charge you additional fees if you choose to sell your leased vehicle.

There is one way to get around these buyout restrictions in your leasing agreement. If your lease agreement includes a third-party buyout restriction, you can still sell your leased car by following these steps:

1. Pay the buyout price. Use your own money to pay the buyout price and end your lease agreement. 
2. Take ownership of the car. Make sure you complete the necessary paperwork so the car is in your name.
3. Sell your vehicle. You are now the legal owner of the car, so you can sell it to a dealership or private party.

Of course, this is only an option if you have the cash to pay the buyout price on your own. If you do, consider this option to get around your lease’s third-party buyout restrictions.