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Maximize Your Car Lease Equity with O1ne Mortgage

If you leased your car around 2020, you might be in a favorable position as your lease ends. Despite a slight softening in used car values in 2023, prices remain historically high, creating a beneficial environment for lease-end equity. This equity arises when your car’s trade-in value exceeds the residual value stated in your lease contract. Here are some strategies to leverage this equity effectively.

Do You Have Equity?

Equity occurs when your car’s lease purchase price (residual value) is less than its trade-in value. To determine if you have equity, follow these steps:

• Find your residual value in your lease contract or contact your leasing company.
• Check your car’s trade-in value using online platforms based on your car’s details.
• Compare the numbers. If your car’s current value is higher than the residual price, you have equity.

Having equity means you have several options. Here are five ways to capitalize on your lease-end equity:

1. Buy the Car Yourself

If you love your car, consider purchasing it at the end of your lease term. You can get financing from your dealer, leasing company, or a bank. Here are the pros and cons:

• Pros: Keep your car, get a bargain, and save money compared to buying a new car.
• Cons: Your car may no longer suit your needs, financing can be tricky, and your car might be out of warranty.

2. Buy the Car and Sell It

You can buy your car and then sell it for a profit. Consider these points:

• Pros: Potentially get top dollar by selling it yourself.
• Cons: You may have to pay capital gains taxes, sales tax, and need short-term financing. Selling a car can also be hard work.

3. Use Equity as a Down Payment

Some dealers will apply your lease equity as a down payment on your next purchase or lease. Here are the advantages and disadvantages:

• Pros: It’s easy and any bargaining incentive is a plus.
• Cons: You might get more money for your trade-in elsewhere.

4. Sell to a Third-Party Dealer

Consider selling your car to a third-party dealer like Carvana or CarMax. Here are the pros and cons:

• Pros: Quick and convenient online offers, no need to finance the deal, and more options for your next car.
• Cons: Some manufacturers don’t allow sales to third-party dealers.

5. Sell to an Approved Dealer

If your leasing company doesn’t allow sales to third-party dealers, they may permit sales to an approved dealer. Here are the benefits and drawbacks:

• Pros: Shop around for the best deal and more flexibility.
• Cons: You may need to do some legwork to find the best deal.

The Bottom Line

Finding equity at the end of your car lease can enhance your negotiating position, whether you buy your car, sell it, or use it as leverage for your next lease or purchase. Consider your options as your lease end approaches.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. Our team is ready to assist you with confidence and expertise.

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