Leases
5 min read
Lease equity is the gap between what your leased car is worth today and what it would cost to buy it from your leasing company. When the car is worth more, you have positive equity, and that money can be yours. When it is worth less, you have none, and handing the car back is often the simpler choice.
How your lease sets the buyout
When you lease, you pay for the right to use a car for an agreed time and number of miles. The leasing company still owns it.
At the start of the lease, the leasing company estimates what the car will be worth at the end. That figure is the residual value, and it is what you pay for the car if your lease includes a purchase option.
Your contract states the purchase price. It is usually a fixed dollar amount, typically the residual value. Some leases use the car’s market value at the end of the term instead, set by an independent used car guide, and some use whichever of the two is higher.
Before the lease ends, the price to buy the car is a payoff amount from the leasing company. Toyota Financial Services, for example, tells lessees to get a payoff quote from their online account or by phone. Most leasing companies work the same way.
Why equity happens
The residual value is an estimate made years before the lease ends. If used car prices move up, or the car has fewer miles and less wear than planned, it can be worth more than that estimate. The difference is your equity.
Work out your equity in three steps
Get your payoff quote. Ask your leasing company what it costs to buy the car today, and whether a purchase-option fee applies. Your lease agreement may list that fee.
Get a real offer for the car. A pricing website gives you an estimate. An offer is a number a buyer will actually pay.
Subtract. Offer minus payoff equals your equity.
An example with round numbers
This example is for illustration only. The figures are made up and it is not an offer.
| Amount |
|---|---|
Offer for the car | $40,000 |
Payoff quote from the leasing company | $32,000 |
Your equity | $8,000 |
If the payoff were $42,000 instead, there would be no equity, and selling would cost you $2,000.
Four ways to use positive equity
Sell to a buyer who pays off the lease
Some leasing companies let an outside buyer pay off the lease directly. The buyer pays the leasing company and pays you the difference. You never buy the car yourself. Whether your lender allows this depends on the lender, and several changed their rules in recent years. Our guide to selling a leased car sets out the lender rules as of October 2026.
Buy the car out, then sell it
If your leasing company lets only you or a dealer of its own brand buy the car, you can buy it out yourself and then sell it to anyone. Count the extra costs first. Almost all states charge sales tax on the purchase price, you also pay title and registration fees, and a purchase-option fee may apply.
Trade it in at a dealer
A dealer can take the leased car as a trade-in and put the equity toward your next car. In some states a trade-in also lowers the sales tax on the car you buy. Texas lets the buyer deduct the value of the traded vehicle from the selling price when the trade is part of the same sale. California does not: the trade-in allowance can’t be deducted there.
Buy the car and keep it
If the car is worth more than the buyout and you like it, keeping it can make sense. You pay the purchase price plus tax and fees, and the equity stays in the car.
If you have no equity
If the car is worth less than the payoff, selling means paying the difference yourself. At the end of the lease you return the car unless your agreement lets you buy it. When you return it, you may be charged for miles over your limit and for excess wear, damage or missing equipment, so check your contract for those charges before you decide.
Ending a lease early usually costs more. You may owe an early termination charge, and you can’t simply return the car and stop paying. A sale can still come out ahead of early termination if the car is worth enough. Run the numbers both ways.
Timing matters
Your payoff changes as you make payments, and the car’s value changes with the market and the miles. Check both a few months before the lease ends so you have time to choose. If you might sell early, ask your leasing company now whether it accepts payoffs from outside buyers.
Questions to ask your leasing company
What is my payoff today, and how long is the quote good for?
Is there a purchase-option fee?
Do you accept a payoff from an outside buyer, or only from me or a dealer?
What will I owe at turn-in for miles and wear?
How Auto Exit fits in
Tell us who your lease is with and we show you the route that applies: whether we can pay off the lease directly, or whether you need to buy the car out first. Your offer comes in about two minutes and is held for 7 days. If you sell to us, we pay the leasing company directly and pay you the equity by bank transfer at pickup, before the car leaves. There are no fees. We confirm on your contract.
