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How To Lower Your Car Lease Payments Via Refinancing

Edmunds experts say consumers could make thousands in cash from refinancing their expiring car lease in 2022. Experts strongly advise consumers to check for equity in their leased vehicle before turning it in this year as demand in the used market continues to drive up values.

Consumers with a lease expiring in 2022 could be leaving thousands of dollars in cash on the table if they don’t plan ahead and check on the equity that is possible from refinancing their expiring car lease. According to the car shopping experts at Edmunds, skyrocketing demand in the used car market is driving up trade-in values and therefore putting a large number of consumers in an unprecedented position to take advantage of positive equity.

“If you’re one of the four million Americans who leased a vehicle in 2019, you could be in quite a financially advantageous position this year and not even know it,” said Jessica Caldwell, Edmunds’ executive director of insights. “Most consumers likely aren’t aware of the other options they have besides turning in their lease once it’s over, including the ability to make a profit from their vehicle via refinancing. If you have a car lease expiring this year, do the legwork ahead of time so you’re prepared with a game plan and smart financial options.”

Edmunds analysts looked at the estimated residual values for car leases from 2019 model year (MY) vehicles leased in January and February of 2019 and compared those residuals to the trade-in values for 2019 MY vehicles that were traded in during January and February of 2022. Edmunds data reveals that on average, the 2022 trade-in value for all 2019 MY vehicles saw a 33% lift, or an increase of $7,208, compared to their original estimated residual value.

Check out the following examples of big profits that can be made through the refinancing of your car lease. The Lexus IS 300 commanded the highest percentage increase for luxury vehicles, generating on average 46% more than its original estimated residual value, an increase of $9,868. The Ford Mustang yielded the highest percentage increase for mainstream vehicles, generating 68% more than its original estimated residual value, an increase of $11,852. A top 10 list for luxury and mainstream 3-year-old leased vehicles that are commanding the highest average percentage increase in their 2022 trade-in value versus original estimated residual value can be found below.

Unless you’ve driven an exorbitant number of miles or your vehicle has excessive wear and tear, you’re pretty much guaranteed to see an increase in value and make a sizable profit when you refinance your auto lease. “The one drawback is that you’ll likely have to do a bit more legwork than in the past to take advantage of the equity in your expiring lease given that some auto manufacturers have recently placed more stringent rules on lease purchase options. But taking some extra steps will be well worth it for many, given the financial reward,” said Ivan Drury, Edmunds’ senior manager of insights.

Find out exactly how much your leased vehicle’s payoff amount is. Call your lender to get a value, which should be valid for at least seven days or until your next payment date.

Find out what your vehicle is worth. Go to a third party like Edmunds to get a free instant appraisal and compare that to your leased vehicle payoff amount to see if you potentially have positive equity in your vehicle.

Find out if your financing company allows third-party buyouts. Historically, one of the easiest ways to make a profit from your ending car lease was to sell your vehicle to a third-party dealership—and let that dealership exercise the buyout. But in light of inventory shortages, a number of automakers have restricted this practice and require that consumers return their vehicle to one of their franchised new car dealerships. A full list of lenders that do and do not allow third-party lease buyouts at this time can be found on Edmunds website.

If your automaker permits third-party buyouts, shop your vehicle around to used car dealers and find the one that will give you most for your car.

If not, try to sell back the car to the same brand’s dealership instead of just returning it at the end of the lease term. Don’t be afraid to shop around your car to multiple dealerships if possible. You should be successful, since all dealers are currently striving to increase their inventory.

If a dealership is unwilling to write you a check for your vehicle, try to leverage the positive equity in your vehicle as a discount on another lease, almost like a loyalty incentive.

Finally, you can try to buy your lease out yourself and sell it for a profit. An alternative is to secure cash or outside financing for the lease payoff amount, take ownership of the car, and then sell it on your own. But note that this will entail additional costs, including loan fees and interest (if you borrow the necessary fund), and registration and title costs, as well as tax obligations that can vary depending on where you live.

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