What Are Third Party Lease Buyouts and Are They Worth It?

Should you buy or lease a car?

Although leasing a car is typically viewed as a not-so-financially savvy decision, there are certain situations in which leasing a car can actually be the best possible option. Whether you really like having the latest safety upgrades in your vehicle or perhaps you’re planning to move cross-country or overseas within a couple of years, leasing a car can be a good fit for your situation. And you might even be able to make a profit from it! What about thrid party auto lease buyouts?

Did you know that some lease lending companies allow consumers to sell their leased vehicles to third parties? And, if demand for used cars is high – like it is in 2021 – then you could potentially make a profit from selling your car before the end of the lease? Perhaps best of all, you wouldn’t have to deal with the DMV or your original dealer – the third-party buyer typically manages all of this for you.

To decide whether third-party auto lease buyouts are right for you, let’s explore what auto lease buyouts are and how they work.

What is a Third Party auto lease buyouts Buyout?

A third-party lease buyout is when a consumer sells their leased vehicle to a party other than the dealer from which they originally leased the car. At the end of most leases, dealers offer consumers the opportunity to buy the car outright for an amount stated within the original lease agreement.

This buyout price refers to the car’s residual value, which is based on various factors, including expected mileage at the end of the lease (e.g., 30,000 or 45,000 miles), wear and tear, and other things contributing to the depreciation of a car from its original value.

However, sometimes the car’s actual value 2-3 years later maybe more than its residual value. In these instances, the consumer could potentially profit by selling the car to a third party before the lease agreement is up. It must be noted here that you would only profit if the residual value is lower than the actual appraised value and there are no other major costs to consider, such as bodywork, repairs, DMV fees, etc.

Which Companies Allow This?

Some lending companies contractually forbid leaseholders from selling their cars to a third party before the end of the lease agreement, especially in 2021, with used car prices skyrocketing. As of July 2021, Leasehackr reports that the following lenders allow third-party buyouts with no penalties attached:

  • Chrysler Capital
  • Credit Union Leasing of America
  • Jaguar Land Rover Financial
  • Lexus Financial Services
  • Mazda Capital Services
  • Mazda Financial Services
  • Mercedes-Benz Financial Services
  • Porsche Financial Services
  • Subaru Motors Finance
  • Tesla Financial
  • Toyota Financial Services

Even if you have a car financed by one of the above companies, it’s important to closely review your lease agreement to see if additional clauses apply (e.g., no lease buyouts within 30-90 days of the end of the lease).

Which Third Parties Should You Consider?

There are several potential options for selling your car to a third party. You could go to a well-known used car dealership in your areas like Carmax, Carvana, or Shift and get it appraised by a professional.

Once you have an offer, compare the amount with the car’s residual value outlined in your lease agreement (you can also find it through your online account with the lender if you have e-payments set up). For greater peace of mind, be sure to get everything in writing to avoid any hidden fees or costly misunderstandings between you and the dealer later on.

How Do the Auto Lease Buyouts Process Work?

You can get an estimate online through most major used car dealerships that do third-party auto lease buyouts. You’ll be asked to provide the car’s license plate and state or VIN number, as well as other relevant details, including current mileage, special upgrades (e.g., leather seats, moonroof), accident/repair history, and safety features.

Once you have a quote and decide to proceed with the third-party auto lease buyouts, you may need to visit the dealership for an in-person inspection to confirm the accuracy of what you reported online. However, some third parties offer to come directly to you for the evaluation. You’ll need to be able to verify everything before the final sale – exact mileage, proof you’re the leaseholder, etc. – so be sure to have all your paperwork ready before proceeding with the buyout offer.

Third-party auto lease buyouts don’t make sense in all circumstances. Still, they can certainly be beneficial for those currently leasing cars worth substantially more than what the dealer initially anticipated when the lease agreement was first signed. As with anything involving a multi-thousand dollar transaction, you should spend some time reviewing the terms of your lease agreement and speaking with a knowledgeable representative from the company you’re considering selling to before finalizing your decision.

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