What To Know About Selling A Leased Car

If you’re nearing the end of your car lease, you may be starting to wonder what your next steps are. Most people turn their car in once the lease is up, but you also have the option to sell the vehicle.

The chip shortage is mostly over in the U.S., but the supply chain problems in the auto industry aren’t over. There’s still a high demand for used cars, so you may be able to sell your leased vehicle for a high price. Let’s look at how selling a leased car works, and the steps you can take to make it happen.

Can You Sell A Leased Car?

Yes, you can sell a leased car. You can sell the vehicle back to the dealership, sell it privately, or transfer the lease to a third party. However, you’ll need to check your lease contract to find out whether you need to obtain permission from your leasing company first.

Your contract may include a third-party buyout restriction, which is a clause that requires you to obtain permission from the leasing company before you sell the car. This restriction is common in leasing agreements, but the language and terms used can make it difficult to understand.

If you’re unsure about the exact guidelines surrounding your leasing contract, you should reach out to your leasing company for more information. If your contract does have a third-party buyout restriction, you can work with them on getting permission to sell the leased car.

Should You Sell A Leased Car?

Before selling a leased car, you should consider the current market conditions, how much equity you’ve built in the vehicle and whether you want to continue making your lease payments. It’s important to save money each month, and lowering or getting rid of monthly lease payments is one way to accomplish this.

As you’re researching your options, here are some common leasing terms you’ll need to know:

• Residual value: A car’s residual value is the total value of the car at the end of the lease. Leasing companies will often use the residual value to calculate the buyout price.
• Disposition fee: A disposition fee is a fee you’ll pay when you return your leased vehicle. Edmunds reports that the average disposition fee typically costs between $300 and $400.
• Termination fee: If you choose to end your lease early, you’ll have to pay a termination fee. This fee is typically the difference between the balance remaining on the lease and the amount credited for the car.
• Third-party buyout restrictions: A third-party buyout restriction requires you to receive permission from the leasing company before selling the car.

How To Sell A Leased Car

If you want to get out of your lease and take advantage of the car’s high resale value, selling may be your best option. Here are your options when it comes to selling a leased car:

Sell Your Car To A Third-Party Dealer

The easiest option is to sell your car to a third-party dealer for a cash offer. Due to the recent shortage of used vehicles, a local dealer may be willing to pay you a good price for your car.

If your leasing company allows it, you can simply sell the car outright. But if the leasing company won’t give you permission to sell the vehicle, you may be able to do a lease buyout and then turn around and sell the car.

Sell Your Car To A Private Party

Another option is to sell the vehicle to a friend or relative who’s interested in purchasing the car. You can either sell the car outright or arrange for that individual to take over the lease. This option takes a bit more work, but it could save you from paying sales tax on the vehicle.

Trade In Your Car For A Down Payment

Unless you live in a city with good access to public transportation, odds are you’ll need to purchase another vehicle. Instead of selling the car for cash, you can trade in your leased vehicle and use the proceeds as a down payment for a new car.

Alternatives To Selling A Leased Car

Selling a leased car isn’t the best choice for everyone. For example, if the resale value of the car is low, selling it may not make sense. If you’re on the fence about selling your leased car, here are some alternatives to consider.

Getting A Lease Buyout

If you like the car and want to keep it, you may want to consider a lease buyout, where you buy the vehicle for a predetermined price. Considering the high cost of used cars, this may be a good choice if the resale value is high.

However, a lease buyout can get pricey — you’ll have to pay off the remaining balance on your lease, the termination fee and any other fees outlined in the contract. Once you’ve purchased the car, the title will typically be mailed to you within 2 – 6 weeks.

Finishing Out Your Lease

In some cases, you may just want to finish out the lease and return the vehicle. By fulfilling your contract, you’ll avoid any termination fees, which will reduce your overall costs. From there, you can move on and figure out your options for your next car.

The Bottom Line

If there’s quite a bit of equity in the vehicle and you want to take advantage of elevated used car prices, you may be able to sell your leased vehicle. Just make sure to review the terms of your leasing contract to determine whether this is an option. If you need help staying on top of your lease payments and other bills, be sure to download the Rocket Money℠ app to track everything in one place.