It used to be that leasing a car was like renting an apartment. At the end of the term, you hand over the keys, with nothing to show for all your payments. But according to Edmunds.com, things have changed in the auto market, and some leasers may be able to benefit from those changes.
Philip Reed, senior consumer advice editor at Edmunds.com, explains: “Two factors — low new car inventories and tight credit — have aligned to raise used car prices, and that’s put consumers in charge when it comes to leasing. Because of these marketplace fluctuations, some leased cars might be worth more than their residual value. And since consumers have the right to buy the car at the end of the lease term, they can profit from the lease company's inaccurate lower estimate.”
So far, so good. But how do you find out if your leased vehicle has equity? Haul out your lease and look for the residual value or buyout price. That’s the amount that the leasing company guessed the vehicle would be worth at lease’s end, and the amount you’d have to pay to buy the car. Next, find out what the car is worth on the market, using Edmunds.com or one of the many other websites that appraise car value. If the car is worth less or the same as the residual, there’s no bonus in it for you, but you won’t be penalized either. But if it’s worth more, you can cash in.
Edmunds.com lists three different ways you can use the car’s equity.
1. Sell it and collect the difference. You can sell it to the dealer from whom you leased it, or, if your lease will allow it—and many do—to any other dealer. They’ll pay the residual to the leasing company and give you a check for the difference. Of course it helps if you bring a printout of the information you’ve found on the car’s value with you for negotiating purposes.
2. Sell the car privately to a friend, neighbor or family member through a lease buyout transfer. This method involves more paperwork, but you can also collect more money than by selling to a dealer who needs to turn around and resell the car. In this case, the buyer sends a check to the leasing company for the residual, who will then forward the title. They then give you a check for the difference in exchange for the title. See your local DMV for more details.
3. Use the equity in the car to make a down payment on your next one, whether you’re leasing or buying. This method probably requires the least haggling.
"Car shoppers who take over an existing lease through a lease-trading service are able to bring the vehicle lease equity with them," said John Levine, consumer advisor specialist with LeaseTrader.com. "When a person takes over a lease contract on a vehicle in short supply at a car dealer, recent history suggests that the equity position may give them an opportunity to buy out the remaining contract and resell it at a profit."
Thus, if you are currently leasing, remember to check out your car’s value before turning it in. It could mean more money in your pocket.