Buying Out Your Lease Could Gift You Extra Cash

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Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - November 18, 2020

Used vehicles are in high demand right now, which means they’re worth a little more than may have been predicted by a lessor. If your lease is about to expire, buying out your lease at the end could mean extra cash in your pocket.

Cashing Out Lease Equity

This year, many leasing companies may be off on their projections of their leased cars’ values. No one likely guessed that we’d have a pandemic that would raise used vehicle values! Since new car production was paused near the beginning of the year, the demand for used vehicles went up, raising their value.

This is good news for lessees who have a lease that’s set to expire soon. If you started your lease around 2017, you could be walking away from your lease with extra cash in your pocket if you play your cards right.

You usually have the option to finance or buy your leased car or return it to the leasing company at the end of your term. But since used vehicle values are up right now, it may be worth it to buy it for the residual value price, then sell it for a profit. Or, you could trade that car and use its equity to lower your next vehicle’s selling price!

When you lease, you’re paying for the time you have a car, plus interest. You're also paying for the depreciation. Depreciation is the silent killer of your vehicle’s value, and it never stops.

The projected value in the car at the end of its lease is its residual value. Leasing companies come up with a residual value at the beginning of your lease based on previous models, experience, resale value of similar vehicles, and several other factors.

Ideally, the value predicted is close to the actual cash value of your car when you turn it in. However, sometimes other factors can influence values, leaving an unexpected residual value at lease turn-in.

Checking Your Lease’s Equity

For a comparison on just how much used vehicle values have risen, check out these average values reported by Edmunds:

Average 2017 MSRP Average Residual Value Average Private Sale Price Average Profit
2017 Jeep Cherokee $34,362 $16,286 $19,415 $3,129
2017 Ford Mustang $31,798 $15,877 $19,587 $3,710

These are just two examples, but used cars everywhere are worth more these days. You can check your own vehicle’s value online pretty easily, using sites like Kelley Blue Book, NADAguides, or Black Book – or use all three to get an average estimated value.

Keep in mind that the dealer is the one that determines your leased car’s value. You don’t have any negotiation power if you have no idea what it’s likely to sell for, so it’s worth it to do some research.

Used Car Market Is Booming

Across the manufacturers, used vehicle values are rising. Production was slowed or halted earlier this year, but it’s largely assumed that many borrowers are trying to pay a little less for their cars right now, both factors driving demand in the used market.

Another influential factor largely thought to impact the used vehicle market is all the first-time borrowers entering the market. With concerns over public transportation due to the coronavirus, many borrowers are buying their own cars for the first time to avoid crowds. New borrowers tend to have lower credit scores, and they’re more likely to qualify for a used vehicle than a new one.

On the Look for Your Next Vehicle?

Whether you’re on the lookout for an auto lender that can work with unique credit, you’re a new borrower, or just need a place to browse new and used car listings, we’ve got you covered. Here at CarsDirect, we cover the latest automotive news and deals and connect borrowers to the resources they need for their credit.

To get matched to a dealership in your local area that has the lending options you need, fill out our free auto loan request form.

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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