A Smart Reason to Cash Out Your Car Lease

A contract is a contract, right? You sign on the dotted line and agree to certain terms. With a car lease, you agree to pay "X" amount for, say, 36 months, and at the end of the lease term you can either buy the vehicle or turn it in. But there’s a third option listed in your contract, although it’s unlikely any dealer will mention it: You can sell your leased car yourself before the end of the lease.

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Some dealers are contacting lessees to offer a sweet deal on a new leased vehicle. In leasing lingo, this is called a "pull-ahead program." The new monthly payments might even be lower than what you are paying now. It sounds great, but don’t take the bait—at least not yet. The fact that they are reaching out to lessees means they want your car and they are confident they can turn around and sell it for a profit.

You may be able to pull the profit out of the car yourself. Go to Kelley Blue Book or Edmunds.com and find the used car dealer price for your model. Then call your leasing company and find out what your current payoff amount is, including the remaining payments, the cost to buy the car and the termination fee of perhaps a few hundred dollars.

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When your total payoff is less than what the car is worth, it makes sense to sell it yourself. A dealer or CarMax can appraise the car, contact the leasing company for the payoff quote and write you a check for the difference. If you’d rather try your hand at boosting your profit by selling the car to an individual, LeaseCompare.com will handle the paperwork for $495 so the title transfers directly to the new owner and sales tax is paid only once.

Wondering whether you should buy or lease your next car? Take our quiz to find out.

Anderson has been with Kiplinger since January 2004, when she joined the staff as a reporter. Since then, she's covered the gamut of personal finance issues—from mortgages and credit to spending wisely—and she heads up Kiplinger's annual automotive rankings. She holds a BA in journalism and mass communication from the University of North Carolina at Chapel Hill. She was the 2012 president of the Washington Automotive Press Association and serves on its board of directors. In 2014, she was selected for the North American Car and Truck Of the Year jury. The awards, presented at the Detroit Auto Show, have come to be regarded as the most prestigious of their kind in the U.S. because they involve no commercial tie-ins. The jury is composed of nationally recognized journalists from across the U.S. and Canada, who are selected on the basis of audience reach, experience, expertise, product knowledge, and reputation in the automotive community.