Unlocking Cash: How to Turn Your Leased Vehicle Into Profit
Download MP3- Used Car Value Fluctuations: Over the past couple of years, the values of used cars have spiked dramatically, making it difficult to find reasonably priced used vehicles. This shift is also impacting new car leasing.
- How Used Car Values Affect New Car Leasing:
- When you lease a new car, you pay for the difference between its new price and its predicted value after a few years.
- Example: If you lease a $40,000 car for three years, and the car is expected to be worth $25,000 at the end of the lease, you're only paying for the $15,000 depreciation.
- Leasing Companies' Predictions:
- Leasing companies estimate the car’s future value (residual value). If they guess it’s going to be worth $25,000, but the car is actually worth $30,000, that’s great news for you as the consumer.
- You have the option to buy the car for the predicted value and potentially sell it for more, pocketing the difference.
- Don’t Walk Away from Equity:
- If your lease is nearing the end, don’t just return the car and walk away. If the car is worth more than the residual value, you could keep the equity by buying the car and selling it yourself, or applying the equity to a new car purchase.
- Leasing Companies’ Mistakes:
- Leasing companies have been underestimating the value of leased cars due to the unpredictable market, leading to higher-than-expected car values.
- As a result, many cars are worth $4,000 more than expected, putting you in a position of equity.
- Changes in New Lease Predictions:
- Leasing companies are adjusting their predictions on new leases, sometimes setting higher residual values due to the increasing market value of cars. This could lead to lower monthly lease payments.
- Shop around to find a leasing company that’s offering better residual values for new cars.
- Trade-In vs. Lease Turn-In:
- When your lease is up, consider your options carefully. Instead of simply turning in your leased car, you can trade it in or use its equity towards a new vehicle.
- Don’t let the dealer absorb the equity without offering you credit for it towards your next car deal.
Key Takeaways:
- Be mindful of your car’s residual value at the end of the lease.
- Check if your leased car’s value is higher than expected, and use the equity to your advantage.
- Shop around for the best deal on new leases, as leasing companies are adjusting their residual values based on market changes.
