Considering the fact you are reading an article titled, “Should I Sell My Lease?” the quick answer you are looking for is, “Yes you should, and yes you can.”
If you clicked on an article with this title, you are probably in one of two categories. The first is that you got a raw deal on your lease and you want out, the second is that you no longer need the car and rue further expenses of keeping it.
In both cases, you should probably sell your lease. Most leasing companies allow for some sort of exit strategy, and sometimes it involves being able to sell before the end of the lease term.
When Is It Easier to Sell Your Leased Vehicle?
For the first part, it is easy when the leasing company makes it easy. You need to be sure that the leasing company allows you to sell your lease. They may have restrictions where they may outright deny your ability to sell your lease. In that case, unless you are selling to somebody you trust, you cannot sell your lease without remaining liable for its safety.
For the second part, when the cost of cars is very high and when the second-hand car market has become very expensive, then it becomes easier to sell your lease. If you are looking to sell your lease during a period when people are having trouble finding a car at a good (or even a bad) price, then selling your lease becomes easier.
High Used Car Prices Have Higher Equity at Lease-End
Many car leases are for three years, perhaps longer, and during the lease, there is a chance that car prices (used and new) will rise sharply. Something may occur that causes prices to rise or demand to rise or supply to lower. There are various influencing factors on the price of new vehicles including things like the recent computer chip shortage.
During your lease period, if car prices take a sharp rise, then your leased car becomes more valuable. If your car has become more valuable just recently, then you should at least consider selling your lease. On the other hand, if you are desperate to reduce or remove your monthly payments and car prices are low, you should look for any other alternative other than selling your lease.
Understanding The Lease And The Value of the Car
There is a difference in the value of your new car from the moment when you start your lease to the moment it ends. When you sign your lease agreement, you are agreeing to pay the lender the value that your car is going to lose over time. Plus, they are looking to make some profit too.
Now, let’s say that you have taken good care of your car and it has retained quite a lot of its value because car prices are rising sharply. If you were to sell your lease for the remaining value of the car, you may make a profit.
Look at it this way with a simplified example. You buy a lease a new Chevrolet at $50,000. The leasing company says it will depreciate by 50% during the 3 years you own the lease. The car is supposed to be worth $25,000 at the end of the lease, but given high car prices, it is closer to being worth $30,000 near the end of the lease. It is around four months until the lease ends, and the buyout price is $28,000. If you could find a buyer for your leased car who is willing to pay $30,000, then you could potentially make a $2000 profit.
What is Your Used Car Worth Outside of Your Car Lease?
In other words, if you are looking to sell your car lease, take a look online to find the average selling price of your car in its current state. When you consider the value of your vehicle, take into account any damage and excessive wear and tear. When looking at prices, do not consider the fact it is leased. Just look for the price you would pay if you were buying that used car from a dealer and a private citizen. You now need to consider these three elements.
This is the price you just researched. It is trickier to determine than most people think because you have to consider damage/wear/tear and the differences in the price in your state over others. Nevertheless, you are looking for a generalized value for your car.
Potential profit over preset residual
This is the difference between the current market value worth that your leasing company decides upon and the residual value worth that you have figured out. If your residual value number is higher, you have the potential to make a profit.
Percent (%) over the preset residual value
Take the value that the leasing company says your car will be worth at this point during your lease, and look at how many other vehicles of this make and model sold for over their preset residual value. In other words, are people in real life overpaying for your car right now?
There Are Two Major Obstacles to Overcome
The first is that it is difficult to get people to buy a lease or even buy out your lease to own the car. The second problem is the leasing company.
The leasing company may have written into your contract that you cannot sell your lease, you cannot have other people buy out your lease, and so forth. They may require you to ask permission to sell your car, and they may say no. They may block you from selling your lease, selling your car, or getting out of your lease, no matter how high used car prices go in the future.
In many cases, car leasing companies are unwilling to let you out of your lease because they are beholden to finance companies, and the finance companies want to keep you in debt as long as possible to draw maximum profit from your lease payments.
Checking Your Contract
You may be tempted to call your leasing company and ask them a bunch of questions about your lease contract, but there are two things to remember. The first is that they are in business to make money and may offer you information that leads you down the most expensive path. Secondly, the reception staff and even many of the sellers may not understand the intricacies of your contract and may offer you sour or useless advice. As you check your lease, here are a few terms you may encounter.
This is the amount of money you will be charged at the end of your lease. It is the cost of restoring your car so that it can be sold to another person. Do not confuse this with your initial rental fee or any sort of deposit.
This is a penalty fee that you pay if you end your lease earlier than you were supposed to. Ending the lease early may be the wisest move, but the termination fee calculations often involve big numbers. It is often less of a financial strain to keep paying the lease rather than paying the massive termination fee.
Third-party buyout restrictions:
This is the part where they will ban you from selling the car, ban you from selling the lease, or ask you to gain permission before you do any sort of selling.
After reading your contract, you will understand how difficult or easy it is to sell your lease, sell your car, buy out your lease, terminate your lease, and so forth. If you have a fuller view of your options and your potential losses, then are better equipped to decide if you should sell your lease.
Finding an Exit Strategy For Your Car Lease
If you are strapped for cash, you may want to sell the car lease.
If you are not strapped for cash and you are simply looking for the best financial decision, then buying your car is a good idea if its value is higher than people thought it would be. On the other hand, if the car markets have turned in a way that makes new and used cars overly expensive, then buying your car and selling it may be your best option.
If you have enough equity in the car to turn a profit, and if you are confident that you can use and enjoy the car if you are unable to sell it for a good price, then buying your leased car and moving the risk of ownership over to you is the best financial decision.
Going forwards, if you decide to buy your car, then you will have to pay off the remaining lease payments, and there will be added fees similar to a termination fee (though probably not as harsh), and any added fees that were stated in your contract.
If you’re set on selling your lease, be sure to go to a reputable lease-buying center, like IMX Auto. When you sell your lease to IMX Auto, you avoid paying disposition fees and receive the best offer on your vehicle.
Your best bet, as you know, is to start with a good lease deal in the first place. Trying to sell an ugly overpriced lease is always going to be more difficult than selling a fair-value lease.
Opt for leasing services like IMX Auto, where you get a good price, but also fair terms and conditions. This means that if your life takes an unexpected turn and you need to sell your lease, you can approach IMX Auto and work out a deal that doesn't involve lost money and high fees.
Again, the best advice has always been to find a good leasing company and start your lease on the right foot. It is the only way to guarantee you get the best value for your money.