Want to Sell Your Leased Car Early? Some Automakers Won’t Allow it
If you’re currently leasing a car and you can’t afford the lease payments, or if your lease is up, you have the option to sell the car in order to terminate the lease. By selling your car lease to a third party like Carmax or Carvana, you can not only get rid of those pesky monthly payments, but you could even stand to make a profit, until now. As of late, some automakers are requiring lessees to return the car to the original dealer they leased it from.
Why would anyone want to sell their leased car?
Don’t get us wrong, it’s easy to return your leased car back to the original dealer or another one of the brand’s franchised dealerships. However, doing so can cost you a considerable amount of money. U.S. News reports that if your leased car has a low amount of miles or is worth more than its predicted residual value, you might not see the potential profits like you would if you sold it to a third-party dealer.
For example, I sold my leased 2019 Subaru Forester to Carvana late last year. I was only one year into the lease when I decided that I didn’t need the car anymore, so I received the payoff amount from the leasing company and had the car appraised through Carvana. The payoff amount was around $24,000, which is the amount that would need to be paid to own the car free and clear. Surprisingly, Carvana offered me around $27,000 (based on the current market conditions), which meant selling it to them would yield a nearly $3,000 profit.
However, depending on which brand of car that you’re currently driving, you may not be able to do what I did. A few automakers, mainly GM and Honda, are now restricting their lessees from selling their cars to third-party retailers like Carmax and Carvana.
Why are they restricting lessees from selling their cars?
There are a few reasons why brands like GM and Honda are currently restricting lessees from selling their cars to other retailers. The first reason is that there are currently fewer cars on dealer lots. Thanks to the global chip shortage, dealer lots have been void of their usually stocked new and used car inventories and now the automakers need to make up for the shortage in some way. One easy way for them to do it is to require their lessees to sell or trade their current cars back to their dealers in order to help fill their lots.
The second reason is profit. Instead of lessees getting the profits from selling their leased cars to third parties, Honda and GM are now looking to reap some of those profits by re-selling those leased cars instead. The chip shortage has skewed the used car market upward this year and by requiring all leased Honda and GM vehicles to go back to their own dealers, the brands can capitalize on the car’s higher values by re-selling them.
The third reason that automakers are restricting lessees from selling their cars to other vendors is to mitigate some of the competition. The pandemic brought an uptick in business to “no-hassle, no-haggle” dealers like Vroom, Carmax, and Carvana. This provided a lot of competition to the traditional car dealerships since consumers (like myself) were selling their cars to these companies and padding their inventories. By getting rid of the ability for consumers to sell to third parties, there will be less competition for brands like GM and Honda.
How to get around these lease-end limitations
If you’re currently leasing a Honda or GM vehicle and are nearing the end of your lease, then there is a way to circumvent the restrictions. At the end of the lease term, you can purchase the car outright and sell it yourself to whomever you want. Just note that this strategy can end up being costly as you’ll need to pay for the car’s taxes and registration fees after you purchase it. You may also need to take out a loan to cover the cost of the car, which will accrue interest.
You can also elect to trade the car in for a new model as both Honda and GM might have special deals for current lessees. However, different regions will have different deals. Hopefully, the market will stabilize soon enough that automakers will lessen these restrictions. But for now, don’t take your leased Honda or GM car to a third-party dealer, you could be turned away.