Can You Sell A Leased Car?

Can you sell a leased car? Yes, you can, and the margins you can earn by doing it are surprisingly high. While selling a leased car is harder than selling a car with a loan, the post-COVID used car market has prices high enough to get out from under your lease and even turn a profit. Many leasing agreements have third-party buyout restrictions that complicate your exit strategy somewhat, so do your research before you get started. You also have to shop around to make sure you're getting the best possible price for your car.

There is a difference in price between a new car at the beginning of a lease and the depreciated value of the car at the end of the lease term. In effect, when you sign a lease, you are agreeing to pay the lender for the amount of value the car is expected to lose over time.

Consider, for example, you leased a 2018 Toyota Avalon when it was new for $40,000, and it was expected to depreciate by 50% by the end of your 60-month lease. The remaining value at the end would have been $20,000. Right now you may have a buyout price (after taxes and interest) of around $24,000. If you can find a buyer for your leased car making an offer close to the current used price of $29,000 or above, you could sell the car today and turn a profit.

Used car prices have climbed steadily throughout 2021, and the COVID pandemic is not over yet. Dealerships remain on the hunt for in-demand vehicles under 2 years of age, or between 3 and 5 years old.

Top Vehicles That Are Selling Above Preset Residual Values

Some vehicles are selling at higher post-lease values than others. The average used car resale price has jumped by more than 21% just in 2021. These cars, in particular, have held their values enough to make them especially attractive off-lease sales. In the chart below, we’re assuming the following definitions:

• Residual value: How much the car is expected to be worth after normal wear and tear over the course of a lease
• Potential profit over preset residual: How much over the residual value the make and model could sell for, and therefore, your profit
• Percent (%) over preset residual value: How many vehicles of this make and model sold for over their preset residual value

Source: Grow

You need permission from your leasing company to sell your car. This can effectively block you from getting a decent buyout price for your leased vehicle, no matter how high used car prices go in the future.

If you're willing to do the research and make the calls, there may still be a viable exit strategy for getting out of your lease. This is to buy the leased car yourself. If you're confident you can get a good price quickly, you can close out your lease payment and make the sale on your own.

If you're wondering whether your lease contract has a third-party restriction, you probably have to check your leasing agreement. Most leases have something like this in them, but the exact terms can be hard to understand. Here are some common but sometimes confusing leasing terms for you to know.

• Disposition fee: The disposition fee is the charge you have to pay at the end of your lease that is supposed to cover restoring your car so it can be sold to the next driver.
• Termination fee: The termination fee is a penalty paid for the early termination of a lease. It is calculated as the total depreciation of the vehicle, minus the payments you've already made. Thus, a car expected to depreciate by $20,000 that you've already paid $15,000 for has a termination fee of $5,000 if you end the lease early.
• Third-party buyout restrictions: A third-party buyout restriction is a clause in your lease contract that requires you to seek permission from the leasing company before you sell.

Be sure to thoroughly read the lease options in your contract and find out how much your car is worth before making the decision to sell. Whatever the terms of your car lease happen to be, you still have several options for selling your car.

Consider Buying The Car

Buying the leased car moves the risk of ownership to you, and it's only really worth it if you have enough equity in the car to turn a profit. With used car prices up more than 40% since March 2020, this is increasingly likely.

If you're going this route, expect to pay off the remaining balance of your lease, plus the early termination and any other fees outlined in your contract. The title is usually mailed out to you within 2 – 6 weeks, after which you can sell the car normally.

Leverage Your Equity At The End Of The Lease

If the car you're leasing doesn't have enough equity left on it to make this worthwhile, you may just want to wait it out and return the car at the end of the lease. This fulfills your contract, and you may even be able to negotiate any disposition or termination fees to reduce costs.

If you're looking to get out of your lease and take advantage of the high resale value of your car, you're probably better off selling the car to another party offering cash. There are several ways to do this.

Sell Your Car To A Dealer For A Check

By far the easiest way to get value out of selling your leased car is to take an instant cash offer. Getting a quick cash offer from an online car buying company gives you the confidence to either sell your leased car outright, if the leasing company allows it, or to buy the car yourself and then drop it off for an immediate payout.

Sell Your Car To A Private Party

If you have an interested third party, especially a private buyer who can pay you right away, think about selling directly to them. You can do this the usual way, by getting the title to your car and selling it outright, or by arranging for the new buyer to take over the lease.

Trade In Your Car As A Hefty Down Payment

Selling your car isn't the only option for getting some money for it. You can trade in a leased vehicle, and any positive equity can be used as money down on a new car.

Used car prices are at an all-time high. This has opened up a new opportunity for people looking to get out of their lease. If your leased vehicle has enough equity left on it to justify the disposition, title and termination fees, you can still make money by selling it online or to a private party.

Thinking about replacing your car? Find out if buying or leasing makes more sense for you before you make a move on your next vehicle.