Leasing a car is a popular option for many drivers, offering lower monthly payments and the flexibility to upgrade to a new car every few years. However, when the lease term ends, most people simply return the car to the dealership, assuming that’s the best option. But did you know that this could mean leaving thousands of dollars on the table? Here's what you need to know to make the most of your lease.

The Basics: What is Residual Value?

When you lease a car, the bank sets a "residual value" at the beginning of the lease. This is the car's estimated value at the end of the lease term, usually three years.

For example, if you lease a $35,000 car, the bank might determine that its residual value after three years will be $20,000. This is the amount you'd need to pay if you decide to purchase the car at the end of the lease.

But here’s the catch: the residual value is just an estimate. The actual market value of your car at the end of the lease could be higher or lower, which opens up opportunities for you as the leaseholder.

Option 1: Return the Vehicle

The simplest option is to return the vehicle to the dealership at the end of the lease.

If the residual value of your car is higher than its current market value—say, the residual is $20,000, but the car is only worth $15,000—then returning the car is a no-brainer. You avoid the hassle of selling it yourself and walk away without any further financial obligation.

Option 2: Purchase the Vehicle

If you love your car and its market value is close to or higher than the residual value, buying the car could be a smart move.

For instance, if the residual value is $20,000 and the car is worth $22,000, purchasing it allows you to keep a car you enjoy while potentially benefiting from its equity.

Before making this decision, however, it's crucial to know your car’s market value. 

Option 3: Trade the Car

This is where you can really make money. If your car’s market value is significantly higher than the residual value, you can trade it in and apply the equity towards your next vehicle.

For example, if your car is worth $24,000 but you only owe $20,000, that $4,000 difference can be used to lower your payments on your next lease or purchase.

It’s simple and tax-efficient. Instead of buying the car outright and dealing with the paperwork, you can let the dealership handle the transaction, avoiding sales tax and other fees.

Leasing a vehicle gives you flexibility and potential financial benefits, but only if you understand your options at the end of the lease. If you want to see if you can sell your leased car, come speak with us at The Lasso. By taking the time to evaluate your car’s value and considering all your choices, you can avoid leaving money on the table and make the most of your lease.