Are you getting ready to turn in your car lease? Here’s a happy surprise: Your leased car may actually be worth more. You could walk away with cash in your pocket, but only if you know how.
The demand for used cars, especially those that are only a few years old, is stronger than in past years. In turn, used-car prices remain stable, even as the cars age. In some cases, prices are rising. For example, used-car values of compact and midsize cars increased $500 on average from January to April this year, according to the NADA Used Car Guide.
For consumers nearing the end of their car lease, higher-than-normal used-car values often can mean that they have a car that is worth more than the residual value, or the amount the lessee expects your car to be worth at the end of your lease. That can result in a cash windfall for savvy consumers in several ways.
First, for consumers who want to buy their leased car at the end of the lease term, they only need to pay the residual value, which often can mean far less than if they were to buy the same car on a dealer’s lot.
Consumers who don’t want to buy their leased car at the end of the term can still benefit as they are entitled to the additional “equity,” the value beyond the residual value in their car lease. They can use that equity toward any additional charges they have for damage to the car or penalties for being over the mileage limit, or as a down payment on another car lease or a car loan.
The dealer should appraise the car when it is turned in from its lease and tell the consumer if there is any equity. Savvy consumers may want to access the pricing data from an automotive information website so they are aware of any additional value before they turn in their leased car.
In addition, there’s rarely a requirement that a leased car be turned into the same dealership that initiated the transaction, though in some cases, you may need to turn it in to the same brand dealer.
In many cases, car shoppers can treat the lease turn-in the same as trading in a car. They can shop around for the best value, not only for their trade but also for the next car they will lease or buy.
A car shopper can even turn in a car lease to a franchise dealer who sells a different brand or even a used-car dealer. That dealer will appraise the car and pay off the leasing company with any equity going to the car shopper’s next vehicle.
It’s even possible to get a check for the equity. Receiving a check typically takes some time because the dealership needs to receive the clear title first. Car shoppers who take this option should get the dealer to provide a written agreement that spells out the amount owed.
Ask the adviser