Do You Have Equity In Your Leased Car? Here Are Options For Taking Action

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Do you know just how valuable your leased car is? You’re about to find out! In 2022, cars are pretty much worth their weight in gold—an unheard-of feat brought about by the “perfect storm” of events.

Given the current car shortage, there’s a unique opportunity for doctors to make a profit selling their leased cars. Let’s take a closer look at the COVID car market and what options doctors have regarding their leased vehicles.

Understanding The COVID Car Market

COVID-related supply chain issues impacted many industries. You may have felt the hit of shortages in the grocery store, like toilet paper or baby formula. If something as basic as toilet paper is in short supply, you can imagine that automobiles certainly are not immune to supply chain woes.

Lack of supply, boost in demand, and rampant inflation led to a car-apocalypse, where new cars are a challenge to come by and used car prices have skyrocketed. Prices have increased so much that the average cost for a used car is nearly $31k, which is a 10.5% increase year-over-year!

Dealerships are so desperate for cars that some are offering to pay out a lease early, at no cost to the customer, so that they can sell the car for current market value. So it’s pretty apparent the COVID car market is competitive.

Now you know what this means, right? All of these factors leave potential room for profit in your leased car.

You Might Have Gained Lease Equity

While you’ve been putting miles on your lease over the years, you’ve also gained equity. It may sound too good to be true, but let’s explain.

Most of your monthly lease payments typically go toward the car’s depreciation cost. For example, if the car was worth $80k when you leased it and is projected to be worth $50k at the end of the lease, your payments “make up” for that 30k depreciation.

But today, the limited supply of cars has their value skyrocketing. For example, some Vestia clients have equity in their leased vehicles of $10,000 and $24,000, respectively. This is unprecedented, but it’s the reality we are living in.

To find out if you have equity in your leased car, look at the original lease agreement. There, it will show the buyout price of the vehicle, and if you enter the VIN on Bluebook, you can get an idea of what the vehicle is currently worth.

As you look through the lease agreement, you’ll find something called the residual price. The residual price is the expected price of the car after the lease is complete, and it’s not uncommon for lenders to overestimate that to cover their bearings.

Once your lease ends, you can purchase the vehicle for the residual cost, and in most cases, that doesn’t make sense (you have fancy new wheels to spin), but given this unique car market, it might be something to consider.

Some of our clients have even more equity because they were way under mileage on their lease since they didn’t drive as much during COVID.

If your car is valued higher than the buyout at the end of the lease, you could gain “lease equity.” What should you do with it? You have a few options.

4 Options For What To Do With Your Now Valuable Leased Car

As you know, the market we are in right now is rather unusual, so you may be a little overwhelmed about what to do next with your car. Buy it? Turn it in? Here are four options.

  1. Turn the car in, not realizing you have a ton of equity. While it may be obvious, we don’t recommend this course of action. Turning the car back in after your lease may be an easy way, but not necessarily the profitable way in this market.
  2. Sell your car back to the dealer (but be creative about it). Another option is to buy out the car and simultaneously sell it back to the dealer. That way, you’ll get a check for the equity and have that cash available for your next purchase. This could be an excellent option for those who may not need an additional car right now.
  3. 3. Buy out the car and sell it to somebody else. Selling your car to someone can be a great way to take advantage of the equity in your leased car. This route will likely require more work because you’ll need to advertise the car to find a buyer (unless you already have someone who’s expressed interest!).
  4. Buy out the car and keep it. If you love the vehicle and have taken good care of it, it may be a good idea to hang onto it. If you bought the same car right now, it would probably cost you $20,000+ more.

Make Your Next Move With Confidence

The current car market is looking like the wild west! There was once a time that the second you drove a car off the lot, it lost 10% of its value. At least right now, it’s gaining value!

If you’re unsure of the potential equity in your leased car and have questions about how it can impact your financial plan, get in touch with our team at Vestia.


Investment advisory services offered through Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, and Vestia Advisors, LLC. Securities offered through Ausdal Financial Partners, Inc., 5187 Utica Ridge Rd, Davenport, IA. 52807 (563)326-2064. Member FINRA/SIPC. Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, Vestia Advisors, LLC, and Ausdal Financial Partners, Inc. are independently owned and operated.

This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.  This information is not an offer or a solicitation to buy or sell securities.  The information contained may have been compiled from third-party sources and is believed to be reliable. All investing involves risk, including the loss of principal.



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