You Might Be Sitting on Money You Do Not Know About
Most people think of a lease as a fixed deal: you make your payments, return the car, and walk away. But here is something dealers rarely bring up. Your leased car might actually be worth more than what you owe on it. That difference is called lease equity, and in today's used car market, it is more common than you might think.
The problem is that most lessees never check. They just hand the keys back at lease end and move on, potentially leaving thousands of dollars on the table. If you are within 6 to 12 months of your lease ending (or even further out), it is worth taking 15 minutes to run the numbers.
What Is Lease Equity, Exactly?
Lease equity is simple math. Take your car's current market value and subtract your lease payoff amount. If the result is a positive number, you have equity. If it is negative, your lease is "underwater."
For example, say your lease payoff is $22,000 and your car is currently worth $26,000 on the open market. That is $4,000 in positive equity sitting in your leased vehicle. You did not plan for it, but market conditions, low mileage, or high demand for your model created it.
This happens more often than people realize, especially when residual values were set conservatively at lease signing or when used car prices spike due to supply constraints.
Step 1: Find Your Lease Payoff Amount
Your payoff amount is not the same as your residual value (though they are related). The payoff is what you would need to pay your leasing company right now to own the car outright. It typically includes:
- Your remaining monthly payments
- The residual value from your original lease contract
- A purchase option fee (usually $300 to $500, depending on the brand)
- Any applicable taxes
To get your exact payoff, call your leasing company directly or log into your account online. Most major captive lenders (like GM Financial, Ally, BMW Financial Services, Toyota Financial) have online portals where you can pull this number in minutes.
Important: your payoff amount changes over time. As you make payments, it decreases. So check the current number, not what your original contract says.
Where to Find Your Leasing Company's Number
Check your monthly statement, the original lease paperwork, or simply search your brand's financial services division online. If you leased through a dealer and are not sure who holds the lease, your vehicle registration or payment history will show the lender's name.
Step 2: Determine Your Car's Current Market Value
Now you need to figure out what your car is actually worth today. There are several ways to do this, and using more than one gives you a better picture:
Free Online Valuation Tools
- Kelley Blue Book (kbb.com): Enter your car's year, make, model, mileage, and condition for an instant estimate. Use the "trade-in" value for a conservative number or "private party" for a higher estimate.
- Edmunds (edmunds.com): Similar tool with slightly different methodology. Getting both gives you a range.
- NADA Guides (nadaguides.com): Particularly useful because some leasing companies base residual values on NADA data.
Real Cash Offers
Online estimates are helpful, but real offers from buyers carry more weight. Consider getting quotes from:
- CarMax: Walk in or start online for a firm, no-obligation offer good for 7 days.
- Carvana: Get an instant online offer based on your VIN and vehicle details.
- Vroom: Another online buyer that provides quick offers.
- Local dealerships: Some dealers will appraise your leased vehicle, especially if you are considering buying or leasing your next car from them.
These real offers give you the most accurate picture of what someone will actually pay, not just what an algorithm estimates.
Step 3: Do the Math
Once you have both numbers, the calculation is straightforward:
Market Value - Payoff Amount = Lease Equity
If the result is positive, you have equity. The bigger the positive number, the more money you could potentially capture. If it is negative, you are underwater, and buying out the lease to resell would cost you money.
Here is a real-world example:
- Your car's market value (average of KBB, Edmunds, and a CarMax offer): $28,500
- Your lease payoff amount: $24,200
- Your equity: $4,300
That $4,300 could go toward your next vehicle's down payment, reduce your next monthly payment, or simply end up in your bank account.
What to Do If You Have Positive Equity
Having equity is great, but what you do with it matters. You have a few options:
Option 1: Buy Out the Lease and Sell Privately
If your leasing company allows it, you can buy out the lease (pay the payoff amount) and then sell the car yourself. This usually nets you the most money, but it requires upfront cash and effort. You will also need to handle title transfer, sales tax on the buyout, and finding a buyer.
Option 2: Trade It In at a Dealer
Many dealers will handle the lease buyout on your behalf when you trade in a leased car. They pay off your lease, give you credit for the equity, and apply it toward your next vehicle. This is easier but you may get less than a private sale.
Option 3: Use a Broker
A car broker can help you navigate the equity capture process, especially if third-party buyout rules make it complicated. They know which leasing companies allow what, and they can often find you a better deal on your next vehicle at the same time.
Option 4: Keep Driving
If you love the car and the buyout price is below market value, buying it out for yourself is a smart move. You are essentially getting a car for less than it is worth, and you already know its full history.
Watch Out for Third-Party Buyout Restrictions
Here is the catch that trips people up. Not every leasing company lets you sell your leased car to someone else (a third-party buyout). Some brands, including Honda Financial, Acura Financial, and at times Toyota Financial and BMW Financial, have restricted or eliminated third-party buyouts.
This means you might need to buy the car yourself first, then sell it. That adds a step and may trigger sales tax on the buyout. Always confirm your leasing company's current policy before making plans.
What If You Are Underwater?
If your payoff is higher than the car's value, do not panic. You are not locked into a bad situation. Your best options are usually:
- Return the car at lease end (you owe nothing beyond any excess wear or mileage charges)
- Wait it out, as your payoff decreases with each monthly payment, which may shift the equity math in your favor closer to lease end
- Explore lease exit protection if you want flexibility before your term ends
Being underwater is not a penalty. It just means the buyout does not make financial sense right now.
When Should You Check for Equity?
Ideally, start checking about 12 months before your lease ends. This gives you time to plan and take advantage of favorable market conditions if they exist. But honestly, you can check anytime. It takes 15 minutes and costs nothing.
Market conditions fluctuate. A car that was underwater six months ago might have equity today if demand for your model increased or supply tightened. Checking periodically, especially in the last year of your lease, is a smart habit.
Full Disclosure
Vantage Auto Group helps clients navigate lease equity situations every day. If you have equity, we can help you capture it and roll it into your next vehicle at dealer cost. If you are underwater, we will tell you that too, because our job is to give you the full picture so you can make the best decision. We charge a transparent broker fee for our services, and there are no hidden costs.
The Bottom Line
Checking your lease equity takes 15 minutes and could save you thousands. Pull your payoff number, check your car's value with two or three sources, and do the math. If you have equity, you have options. If you do not, at least you know where you stand.
Want help figuring out your lease equity situation and what to do next? Get a free quote from Vantage in about 5 minutes and we will walk you through your options with zero pressure. No spam. No pressure. Unsubscribe anytime.
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