Selling A Car

How To Sell Your Leased Car

There are ways to sell your car, even if it is leased or financed.

Selling a leased vehicle can be tricky. One of the issues with leased vehicles is that should you decide you want to sell it before your lease is up, you often can't. Not only are some deals contractually binding to stop you from doing so, but auto finance companies are generally a step ahead, using well-versed formulas to predict the residual value of a leased vehicle before it's ever pulled off the lot for that 3-year warranty. That's how lease pricing is calculated. 

However, in some cases, the marketplace fluctuates – high demand for used vehicles with a low supply of new ones can affect dealership inventories, forcing them to pay above the residual value of a used vehicle to ensure they have cars on the lot. Following the COVID-19 pandemic, the market experienced one of these shifts.    

The post-COVID rush opened the door for millions of leased vehicle drivers, providing the ability to sell off their lease at a profit and move on to a newer car. We'll walk you through how to do that, when to do it, and whom to sell it to.    

Can You Sell a Leased Car?   

The short answer is yes. But it comes with an asterisk – not all finance companies allow a lease buyout. And for those that do, you'll need permission from the leasing company before you can sell it. To ensure you don't run into any legal issues along the way, we recommend doing some additional research into the details of moving on from your lease before taking any action.    

Once you feel well-versed in the specifics, it's time to move forward   

Step One – Find Your Vehicle's Value: After you've received permission to sell your leased car, you'll want to determine your equity in the vehicle. To do this, you can use an online appraisal tool to figure out the estimated value of your car or search for its market value online. When you have that number, you'll want to compare it to the outstanding lease amount. If the value exceeds the payoff amount, you're ready for step two.   

Step Two – Buy Out Your Lease, Transfer Your Lease, or Trade: Do you want to buy out your lease outright or leverage the car's residual value through a transfer or trade? Before selling outright, you’ll have to take care of the outstanding balance remaining on the lease. Many people take out a secondary loan to cover the remaining balance.

If you are selling the car in a private sale, the new buyer will also need to secure funding to complete the purchase. If they are taking out a loan, the process can take a few days or a few weeks, so once you have the buyer secured, they should have funding secured and in place early.

If you are planning to transfer your lease to someone else, they will need to submit an application to your leasing company and be approved first. Using this application, the leasing company will run a credit check and ensure that the person taking over the lease has a suitable income to handle the lease payments on their own. Talk over these details before you make your way to the dealership so that your lessee transfer partner is aware and prepared ahead of time.  

And finally, the easiest option: trading in your vehicle. This option works best for those near the end of their lease – we’ll explain why in a second.

To trade in your car, you’ll need to head to a car dealership. If you have positive equity in the car, the dealer will negotiate with you to provide a trade-in value equal to the equity you have in the vehicle, which you can put toward buying a new car. The caveat to this option is that, should you have substantial time left on your lease (6 months or more), you’ll likely be subjected to early termination fees. Talk to your leasing company before trading in your car to get the exact termination fee amount you should expect to pay during your transaction.

Step Three – Investigate for Additional Fees: When you terminate a lease early, fees will often be attached. You'll want to look more closely at your leasing contract to see if any apply to your situation. If you don't have a copy of this readily available, reach out to your leasing company, and they should be able to supply you with one. Here are some terms to look out for as you review the contract: 

  • Purchase Option Fee: A purchase option fee is a fee that the lessee pays upon the original lease purchase, giving them the option to buy out the lease later.
  • Termination Fee: A termination fee is a fee-based penalty for ending a lease early, calculated by subtracting the remaining balance on the lease from the total depreciation of the car's value. For example, if your early lease termination payoff is $12,000 and the vehicle's value is $10,000, you'd owe that remaining $2,000.
  • Disposition Fee: A disposition fee is an additional charge that a dealership charges the seller to cover the fees associated with preparing the car for resell.

Where Do I Sell a Leased Car?   

After figuring out your leased car's resale value, it’s time to find a buyer. Luckily, there are a few options available:   

Sell to a Dealer for Cash: Who doesn't like instant money in their pocket? Find an online car-buying company that can make you a cash offer using their online appraisal tool. After that, the choice is yours: either buy out your lease and drop the car off for immediate cash or sell your leased car as-is (with permission from your leasing company).   

Sell to a Private Party: If you have a friend, a friend of a friend, or any other third-party buyer interested, consider selling it to them. In this case, you can either arrange for them to take over the current lease (known as a lease transfer) or you can sell it to them outright.    

Trade-In as a Down Payment: You don't need to sell your leased car for cash to make it worthwhile. Using your vehicle as a trade-in is a great way to pay a substantial down payment on your next car.   

Where Do I Start?   

Although used prices have dropped slightly from their peak in 2022, values are still significantly higher than pre-pandemic. If your car is one of those vehicles with a higher value, you’re in luck – you have positive equity and are able to leverage that in whatever way you’d like. Your next step is finding a suitable transaction partner.

Ultimately, what you choose to do with your leased car is up to you. But one thing is for certain: The market is wide open, offering an opportunity not often seen in the car industry. As you continue researching, be sure to talk to experts along the way. Talk to your leasing company before you make any decisions to ensure you’re within the legal limits of your agreement. 

Use the ALGO appraisal tool to find the estimated value of your car.

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Nov 13