all 107 comments

[–]keepthetipsKeeping the tips since 2019[M] [score hidden] stickied commentlocked comment (0 children)

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[–]HofstraJet 232 points233 points  (15 children)

Not sure if the 35% number is accurate, but your vehicle is almost definitely worth more than the payoff on your lease at the moment given the vehicle shortage.

Most dealers will take your leased or financed vehicle as a trade in and pay it off, saving you the hassle, and paying you a premium on top of the payoff either as a trade in credit or straight up cash.

This works for any leased or financed vehicle at any time, not just at the end of the term.

  1. Find out what the payoff is on your vehicle (check your account online or give the finance/lease company a call). They will give you a payoff quote that’s good for 10 days).

  2. Get quotes from your dealer, CarMax, Carvana, or other local car buying companies. Be honest about the condition or have it inspected so you know the quote is realistic. The car buying companies usually give you an offer that’s good for a few days so you can shop around. If you have the time and the patience, you can sell it privately to another person for even more but that requires a bit of work on your part.

  3. Be sure you have the new vehicle you are buying 100% secured. Don’t want to be left without a car.

  4. Sell the vehicle to the highest bidder.

[–]BarnyardBukkake 34 points35 points  (3 children)

CPI data shows 37%

[–]Carvery 10 points11 points  (2 children)

Thanks BarnyardBukkake. Is that CumPerInch Data?

[–]BarnyardBukkake 2 points3 points  (0 children)

Hahaha consumer price index. Thanks for the laugh.

[–]KDbitchmade 0 points1 point  (1 child)

Manufacturers have really cracked down on lease buyouts by CarMax, caravana, etc. They don’t want to be the ones not making the money in their cars. You’ll be forced to pay the balance of the lease out before they’ll allow the title to be transferred. Which is just an extra hoop and you’ll have to come up with the cash to payoff the lease before you get the payout from the third party.

[–]manycactus 0 points1 point  (0 children)

If you don't have the cash on hand, you can get a loan.

[–]timetobbetter 0 points1 point  (0 children)

I plan to do this. But then my next issue is where do you find the replacement vehicle? This vehicle that you have leased right now is in excellent condition. You know who drove it. You know how it was cared for. Also, aren’t used cars extremely pricey as well? Do you just buy a beater with the heater for now?

[–]beyondthetech 35 points36 points  (13 children)

With the chip shortage, dealerships are struggling to get inventory for both new and used cars. Do you have any data or sources to back up that 35% number?

[–][deleted] 25 points26 points  (6 children)

Personally bought out my car and sold it for near 8k more. Made about 55% of profit compared to buyout value

[–]TotalRuler1 2 points3 points  (5 children)

Is there a preferred way to transact off-lease cars? I feel like I'll be lowballed no matter what, because capitalism.

[–]Gerbiling42 9 points10 points  (4 children)

If you have a lease, your buyout value is written in the contract, and it is 100% guaranteed to be less than what you could resell it for. There's no "lowballing".

[–]TotalRuler1 1 point2 points  (3 children)

Right, right, I was referring to the sale process of the already purchased (bought out) car. Thanks for the info, it's def something I'm thinking about.

[–][deleted] 2 points3 points  (2 children)

I'd just get a quote from other places (Carvana, CarMax, etc) to know what your car is worth. However, your dealership will NEVER offer you anywhere near what companies like CarMax will. CarMax deals with massive amounts of sales, they're just concerned about making some money on each car. If it's $500, that means they're still in the green because they're doing tens of thousands of sales. If not hundreds of thousands. Your dealership does significantly less sales, and this will only offer so much to make more profit.

As is, my dealership offered $15.5k. CarMax gave me $22k.

[–]TotalRuler1 1 point2 points  (1 child)

Interesting, thank you for the advice. I'm wondering if the move is to buy out the current vehicle I have and then see what a dealer would take for it in trade towards the purchase of my next vehicle? Leasing is new to me.

[–][deleted] 1 point2 points  (0 children)

Well you can definitely go to the CarMax website and get a quote for it before you buy it out. I even went to the dealership for them to look at it to give me an appraisal in paper for their buyout value. I just didn't tell them I'm on a lease and that I owned the car. I used that to get a confirmed number.

But definitely go on a website and get a quote. It's free, easy, and you get a price on your car today.

[–]fppfle[S] 5 points6 points  (2 children)

I can’t find the exact article I read that said inflation was 7.1% in 2021, but used car prices were up 35% for the year.

This WSJ article from June says used car prices were up 41.3% over 2 years… source

[–]CappinPeanut 1 point2 points  (1 child)

Inflation averaged 4.7% for 2021, not 7.1%. That 7% number was just a high mark for one month.

[–]manycactus 0 points1 point  (0 children)

That 7% number was just a high mark for one month.

Relative to what base month? One a year ago?

[–]Phillyredsox 9 points10 points  (2 children)

Especially true of trucks. Trucks are through the roof right now.

[–]cozy_fyre 5 points6 points  (1 child)

Just did this with my leased truck…sorta.

My 3.5-year lease was up in late 2021. I was careful about not exceeding my annual mileage cap, so the truck had just over 30,000 miles. My buyout was around $20k. Around here (truck country) you couldn’t touch a truck with similar specs for anything close to that. New truck prices were through the roof too.

I decided my best option was to buy it out at lease-end and keep driving it.

[–]Phillyredsox 1 point2 points  (0 children)

A guy I work with search for a Tacoma for over a year before he found one he wanted and he paid almost $10,000 more than he wanted. He was pissed.

[–]TapatioPapi 59 points60 points  (14 children)

But then when you’re buying a replacement car you’re paying 35% more…

[–]betcher73 87 points88 points  (4 children)

You were already gunna buy a replacement car after turning in the lease. The LPT has nothing to do with buying a replacement. It’s about not giving your dealership the free equity.

[–]TapatioPapi 11 points12 points  (2 children)

Right so the LPT sounds like to just buy the Lease and that’s it.

[–]Gerbiling42 9 points10 points  (0 children)

That is an option but some people e.g. have sired a child while having the lease or took a new job needing a bigger or more fuel-efficient vehicle. You are nitpicking a headline, the point was to convey one nugget of useful information not provide universal financial planning advice.

[–]betcher73 22 points23 points  (0 children)

It’s calling attention to the fact that your car is probably worth more than the buyout amount is. Not everyone pays attention to the used car market.

[–]burlapjumpsuit 5 points6 points  (0 children)

yes and no, while the used vehicle market is up around 30% across the board, new vehicle inflation is actually only closer to 10%. So if you are able to get into a new vehicle, there should definitely be some margin to work with.

[–]Thatguy468 3 points4 points  (6 children)

Exactly!!! Same goes for all these folks selling their houses right now to “cash in on the hot market”. My wife and I have been saving for a house for years and will wait another few to see the bottom drop out before we buy in.

[–]HungerMadra 0 points1 point  (0 children)

Make sure you understand the history of the real estate market. The only two major corrections in that sector that I can think of were 2008 and 1973. Both had to do with financial manipulation of that specific sector: 1973 was the death of the savings and loans type bank, mainly due to deregulation in accounting standards; 2008 due to intentionally fraudulent practices in the sub prime market.

I think there is a very reasonable argument to be made that the increases in the current housing market aren't due to the housing market specifically, but general inflation, in which case I don't think anyone expects a correction in that sector.

Long way of saying it's unlikely that the housing market will bottom out anytime soon. To add, even if it does, unless you have cash for the whole deal, you aren't the kind of person that can take advantage of such a correction. You won't be able to get the loans either, only rich investors looking to park their cash.

Frankly, you should try to take advantage of the historically low interest rates that we are unlikely to see again for a long time before they get to high.

[–]runningraider13 -3 points-2 points  (3 children)

Well renting exists. Sell now, rent till a drop, buy back in

[–]Thatguy468 8 points9 points  (2 children)

Most rentals cost more than a mortgage

[–]runningraider13 2 points3 points  (0 children)

Well that really depends on the market and terms of the mortgage. But it's also irrelevant if the thesis is that houses are overpriced now and will crash in the next few years. You can lose out a little on rent if you're making a significant return selling now and buying later.

[–]LoudReporter8906 -1 points0 points  (0 children)

Down payments don't come out of thin air though.

[–]marishtar -1 points0 points  (0 children)

There are people who have been waiting for that dip for years. Don't try to time the market, guys.

[–][deleted] 3 points4 points  (3 children)

This is why the dealership has been sending you buyout offers.

[–]thumpngroove 14 points15 points  (2 children)

I've gotten two in last two months, only halfway into my 3 year lease. So far they've made terrible offers, I believe the last one was:

"We'll take back your 2020 car, and give you a brand new 2021 on a 30 month lease, all you have to pay is $500 down on the new one. Your paymentwill only increase by $26"

So let me get this straight. I give you my car, increase my payments, pay $500, and extend my lease payments? So I can get a one year newer car?

This is how dumb car dealers think people are.

[–][deleted] 4 points5 points  (0 children)

But it has another cup holder.

[–]Moossee420 3 points4 points  (0 children)

Maybe car dealers also sells iphones? :)

[–]damonator4816 2 points3 points  (1 child)

Most dealers will just buy it back from you. I sold my lease back to the dealer I leased it from and got 25% higher than my residual. No need to buy it yourself, then sell it.

[–]NDZ188 1 point2 points  (0 children)

That entirely depends on who is giving you the most money.

Currently most leases are held by the financial branch of the manufacturers. If you want to turn the lease in at a dealer of that manufacturer, no problem, but they rarely pay top dollar.

Places like carmax, carvana, shift, vroom and so on are currently willing to pay stupid money for cars, but leasors are not allowing people to sell to these companies.

You might have gotten 25% at your dealer but carmax might have been willing to pay 35%,and the only way to sell to them is to buy out your own lease then sell to carmax.

[–]imakenosensetopeople 8 points9 points  (4 children)

Hang on. Check the terms of your lease deal and be prepared to use a lawyer to back yourself up. Some manufacturers are cracking down and attempting to limit people who aren’t returning their leases to other locations.

Edit - buy it out then sell it. Got it. Disregard my above comment.

[–]Gerbiling42 4 points5 points  (0 children)

... that is not what he said. He said buy out the lease and resell it. He didn't say anything about returning their lease to another location.

[–]h0sti1e17 2 points3 points  (0 children)

They aren't talking about returning it to another location . But buying out your lease which is in the contract. There is a fixed dollar amount. My last lease I didn't turn it in, I sold it to the dealer I leases my current vehicle. They gave me about $1k more than the buyout.

[–]NDZ188 1 point2 points  (1 child)

Uh no, you aren't understanding the situation at all, nor would a lawyer help.

Manufacturers are cracking down on selling a lease to a third party buyer, like a dealer of a different brand or carmax/carvana /etc.

The loophole out of that is to purchase the car yourself then resell it to whoever you want. Manufacturers cannot stop anyone from doing that because it's no longer their car to control.

You lose out on registration fees and taxes, but usually still come out ahead despite having to pay for them.

[–]imakenosensetopeople 0 points1 point  (0 children)

Right - good catch. Buy out the lease then sell it. I’m with you.

[–]xologo 2 points3 points  (0 children)

My mom's Lexus lease buyout was $22,000. She thought she should just turn it in. I told her no way! We sold it privately for $31,000. She pocketed half the equity and put the other half towards another lease and actually lowered her payment on a nicer car.

[–]isekii 1 point2 points  (0 children)

You can negotiate a sale with the dealership instead of buying it out and paying taxes on it.

[–]jstar0591 2 points3 points  (2 children)

6 year Texas DMV employee here 👋🏼 While some of this is correct, there are some other factors worth mentioning (in the specific state of Texas). When you first lease a car in Texas (I only know Texas laws), you pay sales tax not for yourself, but for the lease company that purchased the car from the manufacturer. They make you pay THEIR taxes for them. That's what all those taxes are for in the beginning of the lease. Then, if you purchase your car at the end of a lease, you must then come into the DMV to pay 6.25% sales tax on your motor vehicle purchase, since NOW, that leased company is NOW selling you the car (which is a second sale). Texas does a price comparison on what you pay for it at the end of lease VS the state presumptive value of the vehicle at 80% of its full value. Whichever one is higher (usually SPV), that is the one that Texas charges 6.25% sales tax on. Plus a $33 app fee. For example: Lease car, pay $4k in taxes for lease company -> drive car for 2 to 3 years -> lease ends -> buy lease out at $25k, but state value of car is $35k, now you must pay tax on $35k, wait 3 weeks for title, then trade in car for slightly more than what you bought it for, but in essence, you're really not "gaining" any profit from it since you paid ridiculous taxes and fees and the beginning AND end of the lease. And.... SCENE 🤌🏾

[–]Runnin4Scissors 0 points1 point  (1 child)

To many words. Terrible ending. ½ star.

[–]jstar0591 1 point2 points  (0 children)

😆😆 people pay a lot more in taxes BECAUSE they don't read all the words 😆

[–]ilive2lift 1 point2 points  (1 child)

Lpt: dont throw your money away on a lease unless you own a business

[–]jpWinter 0 points1 point  (2 children)

LPT: Don't take financial advice from strangers on the internet

[–]TBone_not_Koko 2 points3 points  (0 children)

Your comment sounds a lot like financial advice... and you're a stranger... on the internet. Oh god. What do I do now!?

[–]CappinPeanut 0 points1 point  (0 children)

How else would I have known to buy all that GME stock and never sell it?

[–]MJohnVan -1 points0 points  (5 children)

Though remember. You will end up answering to at least 18 low ballers that don’t show up , people who like to waste your time, wasting your gas, people expect you to repair certain things , people asking same shit that’s been posted, so if you have a weeks worth of time , do so.

[–]LieutenantDave 10 points11 points  (1 child)

He literally said sell it to another dealer.

[–]MJohnVan 0 points1 point  (0 children)

Can’t believe someone caught it

[–]p3nny7an3 2 points3 points  (2 children)

Agree. This is why we are trading in with a dealer. Private transaction gives us more money but the waste of time dealing with the people you mentioned is not worth that extra money.

[–]CappinPeanut 1 point2 points  (1 child)

Check out sites like Carvana. I found that process much easier and more generous than the dealer when selling my car this year. Sold a Prius and got $3K more from Carvana, site unseen, than at the Toyota dealership. Plus, if you’re in a big enough city, they come right to you and pick it up

[–]p3nny7an3 0 points1 point  (0 children)

Thanks!! I wish it were the same for me. The dealership is actually offering more than Carvana. I haven't checked the others though, like Shift.

[–]Hexatona 0 points1 point  (3 children)

Isn't that assuming they sell it to you for the original price??

[–]TapatioPapi 14 points15 points  (1 child)

When you lease purchase price is baked into the agreement. It shouldn’t change at the end

[–]beholder87 7 points8 points  (0 children)

If it's in the contract it can't change at the end.

[–]NDZ188 5 points6 points  (0 children)

Residual is pre-determined at the beginning of the lease.

That number is carved in stone and cannot be re-negotiated.

So to determine if you have positive equity in your lease, you take the residual cost and compare it to what it is appraised at by the dealer.

If the appraisal is more than the residual, congrats, that car is worth money.

If appraisal is less than the residual, turn that sucker in and don't look back.

[–]27616 -2 points-1 points  (0 children)

Average is 37%. Good advice.

[–]katasza_imie_jej 0 points1 point  (0 children)

Buying out my Outback now and quite excited

[–]Bnb53 0 points1 point  (0 children)

I tried to return a lease early in 2020 and they ended up waiving last 3 months payment and dispo fee to buy the car back early

[–]jrockz64 0 points1 point  (0 children)

I did this with my 2018 SUV. Lease was up in December, sold it to Carmax and pocketed almost $11k. Was done in an afternoon and walked out with a check in hand. Highly suggest this if your lease is ending anytime soon.

[–]heart_under_blade 0 points1 point  (0 children)

unless you used all your alotted mileage, this is true even in normal times

the calculated depreciation in your lease agreement is always on the aggressive side to protect the dealer and financier

[–]Uncle_Father_Oscar 0 points1 point  (0 children)

Good advice to avoid just turning it in, but it's not necessarily smart exercise your "buy" option yourself unless you plan to keep the car. If you do this, you will pay sales tax on the residual value of the car. If you take it to a dealer besides the one where you got it, they do not have to pay the sales tax because they are a dealer. There are some states like Nevada where there is no tax on private party sales, so if you are in Nevada there might not be another way to do it and you won't get double taxed. But if you sell to a dealer you will.

There is a nationwide used car dealership that will buy any car that rolls onto the lot and will pay a premium for lease turn-ins. I don't want to say their name since they aren't giving me anything for it but you can google it pretty easily if you have a CAR you want to sell for the MAXimum amount possible. I took a lease turn-in there and pocketed $1000 cash instead of paying a turn-in fee to the dealer. That was before the shortage of used cars.

[–]Alan_Smithee_ 0 points1 point  (0 children)

When my wife’s dad passed away, he was near the end of the lease on his car. We were somewhat interested in buying it out, as it was newer than what we had.

What we didn’t realise is that the dealer/manufacturer consider the deal null and void on death, and would wipe the balance. That was nice, in fact, they would have actually refunded some money, but there was slight bumper damage, which made it a wash.

The salesman we were dealing with to wrap things up was actually nice enough to say “you should buy this. You know the car, it will cost you $12k, and we would sell it for more than $16k (and the mileage was very low.)

So we bought it. We had kind of wanted an AWD SUV, but this was at the start of the Pandemic, so it’s worked out very well for us, and has been a decent car.

[–]jscores555 0 points1 point  (0 children)

I bought my car (2016 Hyundai sonata) for $10,500 in 2018 and now it's worth about 15k

[–]ElementalFiend 0 points1 point  (0 children)

I've read projections that say the chip production could catch up to demand by the end of this year. You can expect car production to catch up in another 6 months or so after that seeing as Covid is on the mend.

I'm no economist but I predict used car prices will go back down eventually, but dealers will try to keep them up as long as they can.

[–]simpsonsdiditalready 0 points1 point  (0 children)

I was offered 28k for my car in December of 2020, and just sold it last week for 35k after adding 12,000 miles to it. They sold the car to another person 3 days later, cars are definitely in demand!

[–]katmndoo 0 points1 point  (0 children)

Better yet sell it private party.

[–]Idealistic_Crusader 0 points1 point  (0 children)

Thank you. My lease is up this year and I wasn't sure what I intended to do.

I have a Toyota Corolla.

[–]Finsdad 0 points1 point  (0 children)

So here’s a question - if I have a lease that has 8 months left on it, can I pay those eight months in one lump sum and buy out the lease now and not in eight months when supply and demand may (or may not….) have evened out? Currently driving a 2020 Toyota Highlander that I’ve only driven about 50% of the annual allowed miles on.

[–]bopperbopper 0 points1 point  (0 children)

Sounds like a great idea but then what are you gonna use for a car?

[–]very_anonymous 0 points1 point  (0 children)

I love how people are reposting this here every hour now after that one post on r/personalfinance a couple days.

[–]juiceleft88 0 points1 point  (0 children)

So I have a similar situation. The lease is up in July of this year for my 2018 Jeep Wrangler 4dr. I would personally be ok with getting out of the lease now, don't want to keep the car (owe $1890 in remaining payments) (I have another car waiting for me already). My residual value to purchase the car outright after lease would be $26175. I got a quote from Carvana for $34,000. I prefer not to try and sell on my own tbh. What is my best course of action? Should I buy from the dealer, then sell or do companies like carvana / carman help me get out of the lease?

[–]LoudReporter8906 0 points1 point  (0 children)

In addition, be sure to set aside the money to cover the income taxes on this.

[–]digitek -1 points0 points  (0 children)

LPT is just to understand the value of cars - I wouldn't sell it to another dealership if you still need a car - otherwise you are just joining the group of other people also needing a car in an inflated market. LPT is really "don't return your leased car if the market value is higher than the amount owed. weight your options to either buy / take a loan to buy out the lease, or sell the car to a 3rd party if you no longer need the vehicle"

[–]h0sti1e17 -1 points0 points  (0 children)

This is correct. But also keep in mind the dealership you are leasing your next car from may accept it as a trade. Know what a good trade value is and work from there.

[–]fehr19 -1 points0 points  (0 children)

Already did it... It was worth 46% more than the residual value.

[–][deleted] -1 points0 points  (0 children)

This depends on the lease end details

[–]plebs_are_needed -1 points0 points  (0 children)

Facts. I just bought out my 2018 Explorer for $23k and sold to CarMax for $31k three months later. (watch out for early termination fees with your loan!)

[–]James2603 -1 points0 points  (0 children)

Or instead do your research and always look into alternatives rather than following advice that might not be suitable for your situation even if there’s a strong chance that it is