(WXYZ) — If you leased a car in the last two to three years, it may be worth a lot more money now than the residual value, which is the car's predetermined worth at the end of your lease.
The reason? The continued chip shortage. Not as many new cars are available, so the demand for used cars has increased big time.
The price of used cars and trucks is up over 35.3% over the last 12 months, according to the U.S. Bureau of Labor Statistics. Prices were even higher during the first two months of the year.
Steve Alley's family of six from Clarkston has been leasing a Chevrolet Suburban but decided to turn the lease in a couple of months.
"When we turned in the lease, [the salesman] said our residual value was less than what they would buy the car from us for," Alley said.
In the end, Alley made about $7,000, and the family put that money toward leasing a new Suburban — which kept the price point where they wanted it.
Randy Wagner has been selling cars for 27 years. He's the General Sales Manager at Art Moran Buick GMC in Southfield.
Wagner said the positive equity he's seen on leased vehicles is ranging anywhere from $500 to $6,000-$7,000, with pickup trucks and full-size SUVs getting the most value.
"Now we are purchasing that leased vehicle and putting it on our used car lot and retailing it to customers because inventory is so low," Wagner said.
Wagner explained that his dealership is probably purchasing 95% of every leased vehicle being turned in right now.
The plus for customers turning in a lease?
“They’re either taking that money and putting it in their pocket, or they're taking some of that money and applying it towards a new lease or to the purchase of a new vehicle," Wagner said.
He knows from personal experience, too.
Wagner said the three-year lease on his wife's GMC Yukon Denali was only halfway up when he realized the dealer payoff of nearly $50,650 was significantly lower than the truck's current appraisal of $65,000.
So, the Wagners decided to turn their lease in a year-and-a-half early. The dealership cut them a check for more than $12,370.
Of course, you may want to consider buying out your lease when it's up, because you'd be buying the vehicle for much less than if you were buying it off a dealer lot.
Thankfully, Alley's family found the ride they wanted with a trade-in value in their favor.
So, if you have a lease, understand your options:
- Know what your vehicle is worth (you can get estimates on edmunds.com, carfax.com, and similar sites)
- Look up the buyout amount on your leasing contract
- See if you can do a 'third-party buyout' (if your financing company says yes, you can shop around for the best deal)
- Ask if there would be any fees for buying out the lease early
The value of used cars and trucks — while higher than we've seen in years — has been on a downward trend since the start of 2022. So, it's anybody's guess how long this phenomenon will last.