Getting money back at the end of a car lease by selling it?
December 18, 2015 12:31 PM Subscribe
I have a car lease that is ending in about a month or so. I was told I might actually to get money back at the end of my lease if I sell my car. I don't understand how. I thought I just turn it in and walk away. Details inside.
I am leasing a 2014 Corolla that has less than 10,000 miles on it. It was a two year lease that ends in one month, but I don't drive enough so I want to go completely car-less. I was going to simply turn my car into the dealership when I was done, but I called the dealership where I leased the car initially and the guy told me I should be able to get like $2,000 back for it. (I am in a new city, so I would be returning it to a different dealership.) He said since my car has so few miles, it has a lot of value. He suggested I go to Car Max and get a quote of what they would offer me and then take it to the dealership. I told him I don't own the car, I just lease it, and he said yes, but the dealership can take over the lease from me and buy it.
Does anyone know how this works? For this to work, do I need to pretend I am considering keeping the car? The car in rather good condition, minus some small dings, and has barely any miles, but it is just a lease. The guy on the phone said I could get anywhere between $500 and $2000 back, which sure sounds good to me. How do I do it?
I am leasing a 2014 Corolla that has less than 10,000 miles on it. It was a two year lease that ends in one month, but I don't drive enough so I want to go completely car-less. I was going to simply turn my car into the dealership when I was done, but I called the dealership where I leased the car initially and the guy told me I should be able to get like $2,000 back for it. (I am in a new city, so I would be returning it to a different dealership.) He said since my car has so few miles, it has a lot of value. He suggested I go to Car Max and get a quote of what they would offer me and then take it to the dealership. I told him I don't own the car, I just lease it, and he said yes, but the dealership can take over the lease from me and buy it.
Does anyone know how this works? For this to work, do I need to pretend I am considering keeping the car? The car in rather good condition, minus some small dings, and has barely any miles, but it is just a lease. The guy on the phone said I could get anywhere between $500 and $2000 back, which sure sounds good to me. How do I do it?
When you negotiated the lease two years ago, the agreement included a buy-out amount. At the end of the agreement (one month from now), you have the option of buying the car for the buy-out amount or returning the car. In general, car manufacturers set the buy-out amount such that you would pay more or less what you would otherwise pay for a two year old car with the lease-allowable number of miles on it. In other words, in general, the buy-out amount is a neutral deal - the car manufacturer doesn't want to set the price so low that you are incentived to lease the car then buy it at the end of the lease rather than buying it in the first place, and the car manufacturer doesn't want to set the price so high that they always have to resell the leased cars when they wouldn't otherwise have to.
The potential deal here is that the buy-out amount is probably a bit lower than than the car is worth (due to the miles you never used). So, you could buy the car for $x, then resell it for $x + $500 to $x + $2000 and make a bit of money. Of course, the dealership is interested in offering this possibility for you, because they can buy it at $x + $500 and resell it at $x + $2000.
At any point, you can always have someone take over your lease - including the dealership. The dealership can then take advantage of the buy-out amount and do the same thing. It's up to you to negotiate with the dealership whether you want to return the car or take advantage of the buy-out amount and attempt to resell the car for more than the buy-out amount.
It is up to you whether or not a potential profit of $500 to $2000 is worth your effort in buying, then selling the car. Although I don't know much about your car or the car market around your area, I would expect the potential profit to be at the lower end of that. Commonly leased and commonly rented cars like the Corolla generally flood the market with ~2 year old cars (when all the leases come back and when all the rental companies sell their cars), which generally drives down prices and profit.
posted by saeculorum at 12:42 PM on December 18, 2015 [8 favorites]
The potential deal here is that the buy-out amount is probably a bit lower than than the car is worth (due to the miles you never used). So, you could buy the car for $x, then resell it for $x + $500 to $x + $2000 and make a bit of money. Of course, the dealership is interested in offering this possibility for you, because they can buy it at $x + $500 and resell it at $x + $2000.
At any point, you can always have someone take over your lease - including the dealership. The dealership can then take advantage of the buy-out amount and do the same thing. It's up to you to negotiate with the dealership whether you want to return the car or take advantage of the buy-out amount and attempt to resell the car for more than the buy-out amount.
It is up to you whether or not a potential profit of $500 to $2000 is worth your effort in buying, then selling the car. Although I don't know much about your car or the car market around your area, I would expect the potential profit to be at the lower end of that. Commonly leased and commonly rented cars like the Corolla generally flood the market with ~2 year old cars (when all the leases come back and when all the rental companies sell their cars), which generally drives down prices and profit.
posted by saeculorum at 12:42 PM on December 18, 2015 [8 favorites]
Find out what the payout is on the car. If someone is willing to pay you more for it, bonus!
FYI, Husbunny and I traded our leased vehicles in, with 14k and 11k miles on them. We broke even.
You can see if you can make money, but I'd be surprised.
posted by Ruthless Bunny at 1:01 PM on December 18, 2015
FYI, Husbunny and I traded our leased vehicles in, with 14k and 11k miles on them. We broke even.
You can see if you can make money, but I'd be surprised.
posted by Ruthless Bunny at 1:01 PM on December 18, 2015
1. Read your lease document. Make sure that you can 'assign' the lease to a third party, and whether you need the lessor's agreement to an assignment if you want to take up this option.
2. Do some research on what your car is worth on the market. Note, if you sell to a dealer, the dealer will want a slice. If you sell privately, there may be costs and risks (scammers).
I have done this, with a lease from a leasing company, not a manufacturer or dealer. I bought the car from the lessor at the residual (buy-out) amount at the end of the lease, because I wanted to keep the car. My residual amount was a LOT less than the market value of the car at that time, and if I had sold it I could have made a lot more than $2k but I wanted to keep the car (still have it).
It's free money, not something I generally refuse. Somebody is going to get that money, why not you? Sounds like you have a few options, in your shoes I would be looking for the best way to keep as much of it as I reasonably could.
posted by GeeEmm at 2:14 PM on December 18, 2015
2. Do some research on what your car is worth on the market. Note, if you sell to a dealer, the dealer will want a slice. If you sell privately, there may be costs and risks (scammers).
I have done this, with a lease from a leasing company, not a manufacturer or dealer. I bought the car from the lessor at the residual (buy-out) amount at the end of the lease, because I wanted to keep the car. My residual amount was a LOT less than the market value of the car at that time, and if I had sold it I could have made a lot more than $2k but I wanted to keep the car (still have it).
It's free money, not something I generally refuse. Somebody is going to get that money, why not you? Sounds like you have a few options, in your shoes I would be looking for the best way to keep as much of it as I reasonably could.
posted by GeeEmm at 2:14 PM on December 18, 2015
It's important, probably, to note that what we call "car leases" aren't really leases in the same sense they once were, or in the sense the word is used in most other contexts.
They're specialized financing deals that have a balloon payment at the end, so that they look and feel sorta like leases in use, but are (I suppose) easier to manage for the financing companies or something. And you're free to treat them that way, which is critical.
(I am not a finance person, but the key difference is probably the name on the title.)
This means that you can sell the car just as you would any other car most of the time, or so I understand, assuming you have a way to pay off the lien holder, i.e. the financing company. This is exactly the way it is with a conventionally financed car: you can sell at any point, but still have to pay off the balance somehow.
It's just that, with leases, you'll generally owe much more on the car at any given point than you do buying outright, since you're paying less every month.
If you leased a car that holds value well, took good care of it, and drove it drastically fewer miles than the lease expected, yeah, you could end up with an asset that is worth more than is actually owed.
posted by uberchet at 2:27 PM on December 18, 2015 [1 favorite]
They're specialized financing deals that have a balloon payment at the end, so that they look and feel sorta like leases in use, but are (I suppose) easier to manage for the financing companies or something. And you're free to treat them that way, which is critical.
(I am not a finance person, but the key difference is probably the name on the title.)
This means that you can sell the car just as you would any other car most of the time, or so I understand, assuming you have a way to pay off the lien holder, i.e. the financing company. This is exactly the way it is with a conventionally financed car: you can sell at any point, but still have to pay off the balance somehow.
It's just that, with leases, you'll generally owe much more on the car at any given point than you do buying outright, since you're paying less every month.
If you leased a car that holds value well, took good care of it, and drove it drastically fewer miles than the lease expected, yeah, you could end up with an asset that is worth more than is actually owed.
posted by uberchet at 2:27 PM on December 18, 2015 [1 favorite]
Response by poster: The way the guy from the Toyota dealership in my previous city explained it to me was that yes, there is something like $13,500 left in the terms of the financing I set when I leased by car if I wanted to buy it, but the dealership would likely turn around and sell it for $16,000 or something because of the condition it is in. (He said he was telling me this since I am not in the area anyway and the dealership I return it to is going to try to make money off it.) I don't actually want to buy the car and shop it around, so if there is a way in a single transaction to return it and sell it for money, I'd like to do that.
I guess the remaining question is, if I want to do this, should I go through something like Car Max or just see if a dealership in my area is interested to avoid getting screwed? My other question is, do I wait for the lease to end, or should I try to do this early before it ends?
posted by AspirinPill at 2:35 PM on December 18, 2015
I guess the remaining question is, if I want to do this, should I go through something like Car Max or just see if a dealership in my area is interested to avoid getting screwed? My other question is, do I wait for the lease to end, or should I try to do this early before it ends?
posted by AspirinPill at 2:35 PM on December 18, 2015
You may as well do it now. There's no benefit to waiting.
posted by Ruthless Bunny at 2:53 PM on December 18, 2015
posted by Ruthless Bunny at 2:53 PM on December 18, 2015
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posted by jabes at 12:42 PM on December 18, 2015