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Is Your Car Lease Up? Don’t Lease Another Car. Buy The Car You’re Leasing Now

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You may be sitting on gold. Don’t let someone else have it. 

Are you sitting on gold? Photo by Dmitry Demidko

Are you sitting on gold? Photo by Dmitry Demidko

The one question I get again and again—and have been asked a lot lately—is this: My lease is up; what should I get next? 

My answer? BUY YOUR LEASED CAR! 

Why? It’s probably worth a lot more than the price you’d pay for it if you bought it used. And, not only is it a tough time to buy a new car, it’s an even worse time to lease a car.

Here’s why: When you lease a car your lease contract specifies that you have the right to buy that car at a preset price at the end of the lease. This not only allows you to buy the car, but also avoid having to pay for excess milage on the car, wear and tear and turn-in fees.

So your just off lease car is most likely worth a lot more than you may think. When  you leased your car in 2018 or 2019, there was no way anyone could have predicted a pandemic, global supply shortage and record setting prices for new and used cars. So, the buyout price of that leased vehicle is likely 30%-40% or so below the MSRP when it was new and probably 20% below what it would cost to buy it used right now. Maybe more. 

Related: Used Car Buying Tips: What You Need To Know

Dealers Are Making Good Offers on Your Leased Car. But is It Really a Good Offer?

Is buying out your lease a good idea? Photo by istockphoto

Is buying out your lease a good idea? Photo by istockphoto

This is why dealers area are calling you to get you to bring it back or turn it in early even though they are short on inventory. They know how much your car is worth and that they can make thousands flipping it to the next customer. “It’s getting really really ugly behind the scenes,” said LeeAnn Shattuck, car purchase concierge The Car Chick. “The used car market has turned into the Hunger Games for dealers (and customers).”

So much so that lease payments, typically attractive because they are much lower than loan payments, are creeping up due to high demand and low inventory. “The money factor, which is the leasing equivalent of an interest rate, equates to 6 or 7% in many cases,” she said. Compared to 2%-4% interest rates on car loans, and “combined with the higher prices of cars right now anyway, is leading to monthly lease payments being close to normal loan payments. Leasing is not remotely attractive right now for most makes and models.”

Related: Ask the Car Chick: Buying vs. Leasing: What’s Right for Me?

Buy Your Own Leased Car and … Make Money? Yes!

Make money by buying our your lease. Photo by Alexander Mills

Make money by buying our your lease. Photo by Alexander Mills

But, “you can buy out your lease and turn around and sell it and make money,” LeeAnn said. “Companies like Carvana have been offering insane amounts of money for gently used cars and have been stealing all the good leased cars.” Carvana, Shift, Vroom, CarMax and more are actively recruiting off lease and used cars to buff up their inventory. Wouldn’t they love to get your car at the buyout price when they would willingly pay thousands more for it? The reality is, you can buy out your leased car, turn around and sell it to them and walk away with a nice bonus. Perhaps enough for a solid down payment on a new car.

“I am leasing a Kia Niro plug-in hybrid for one of my California clients, but we’re having to sell her leased electric Volkswagen Golf to a VW dealership,” LeeAnn said. Normally, the Kia dealer would take her VW trade in and do the paperwork for her, but that’s not the case now. “We’re still making it work, but we have to do it in two separate transactions,” she said. Her client will make about $8,000 by selling her car to the VW dealer. “There are still a lot of tricks that you can use to make good money selling your leased car, but it’s definitely more difficult now than ever before.” It’s important to read your paperwork, know the value of your car in the current market and give yourself time to complete the transaction(s). 

Related: Ask The Car Chick: How Do I Get the Best Deal on A Cheap, Used Car Without Feeling Like I’m Compromising?

And If You Are Leasing a Car Right Now…

On the other hand, if you are leasing a car right now, make sure your lease will cover the mileage you need, keep up with the maintenance and be prepared for the expense of turning it in. Because at new car valuations right now it’s probably NOT going to be a good deal to buy out the lease in 3 years. Or at least we would guess. But who can predict the future?

Scotty Reiss

Scotty Reiss

Journalist, entrepreneur and mom, Scotty likes to say the automotive business found her, she didn't pursue it. But recognizing the opportunity to give voice to powerful female consumers and create a voice to match their spending power, her mission became to empower women as car buyers and owners. A career-long journalist, she has written for the New York Times, Town & Country, Adweek and co-authored the book Stew Leonard, My Story, a biography of the founder of the iconic grocery company Stew Leonard’s. Her love of cars started when her father insisted she learn to change the oil in her MG Midget, but now it mostly plays out in the many road trips taken with her family.

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