You can sell a leased car, but the lease has to be paid off first, because the leasing company owns the title. Some leasing companies take that payoff only from you or from their own brand's dealers. So check your lender's rule, get the payoff for your buyer in writing, and find out whether your state taxes a buyout before you pick a route.
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The leasing company owns it. Your name is on the lease, but the title is in the lessor's name. Nebraska's DMV, for example, issues a leased car's title with the leasing company as the titled owner and mails it to the leasing company. The person leasing the car gets only a copy marked "Registration Copy." With no title of your own to sign, you can't hand the car to a buyer the way you would a car you own.
What you may own is a right to buy it. The CFPB puts it plainly: your payments don't go toward owning the car unless there's an option to purchase it. For a consumer lease, federal Regulation M makes the leasing company spell that option out in your contract: whether you can buy the car, the price at the end of the lease, and, for an earlier purchase, the price or how it's worked out and when you can use it.
So find that section of your lease before you do anything else. If there's no purchase option, you can't sell the car. The FTC says it simply: at the end of a lease you have to return the car unless the agreement lets you buy it.
You have lease equity when someone will pay more for the car than it costs to buy it out. To sell a car with lease equity and keep the difference, you need two numbers: a real offer, and the payoff the leasing company will accept. Offer minus payoff is your equity. If the offer is lower, you have negative equity, and selling means paying the gap yourself.
The payoff is not the same as the residual. The residual is the leasing company's estimate, set when you signed, of what the car would be worth at the end. Regulation M defines it as a value "estimated or assigned at consummation by the lessor." If the car held its value better than that guess, you have equity. Whether that happened depends on your model and the market, and how fast cars lose value shows why the gap can swing either way.
Get the payoff in writing, and ask who it's for. Some leasing companies quote you one payoff and won't take it from anyone else. BMW Financial Services says the payoff in a customer's account "is intended for you, and will not be honored if sent in by a third-party dealership." When you call, ask for the exact amount the specific buyer you have in mind would have to pay, and the date it's good through.
It depends on the leasing company. Some carmakers' finance companies accept a payoff only from you or from a dealer of their own brand. When Honda's finance company announced its change in July 2021, it said Honda was "the latest automaker to enact such a policy." Here is what the leasing companies' own pages say:
| Leasing company | What its own page says |
|---|---|
| GM Financial | "We do not currently process lease purchase requests through non-GM dealerships." You can buy the car yourself at any point during the lease. |
| American Honda Finance (Honda, Acura) | Announced July 8, 2021: lessees can buy their leased car but are otherwise required to return or trade it in to a Honda or Acura dealer only. It said the policy would be reassessed at the end of that year, so confirm the current rule. |
| BMW Financial Services | The payoff shown in your account will not be honored if a third-party dealership sends it in. |
| Toyota Financial Services | If you give the car to a third-party dealership, you remain responsible for everything in the lease until it receives the payoff funds and all required paperwork. |
These rules change, and your contract is what counts. Call the number on your lease statement and ask two things: will you accept a payoff from this buyer, and what payoff will you quote them? If the answer is "only our brand's dealers," you still have options. You can get offers from more than one dealer of that brand, or buy the car out yourself and sell it to anyone.
If your leasing company accepts the buyer, this is the simpler route. The buyer pays the leasing company the payoff it quotes them, and the rest of the offer is yours. It works much like selling a car that still has a loan, with the leasing company in place of the lender.
Settle these before you hand over the keys:
Don't leave this to the final days of the lease. The buyer's payment and paperwork have to reach the leasing company, and a deal started too late can run out of time. Ask any buyer up front how long they need.
If the leasing company won't take a payoff from your buyer, buy the car yourself, get the title, then sell it to anyone. The cost of this route is the tax and fees on your buyout, and that is where states differ.
Texas taxes the buyout as a new sale. The Texas Comptroller says motor vehicle tax is due from you on the purchase "since a new taxable sale (second transaction) has occurred." The tax is based on the option price you pay, and the state's standard presumptive value rules may apply. You also "cannot claim a credit for tax paid in the lessor's name." The rate is 6.25 percent. A licensed Texas dealer buying a used car strictly to resell it doesn't owe that tax, so in Texas, letting a dealer pay off the lease directly can spare you the tax you'd owe on your own buyout.
California has a 10-day window. Under Regulation 1610(d)(2), the leasing company's transfer to you at the end or termination of the lease is presumed to be a sale for resale, which isn't taxed, if you transfer title and registration to a third party within 10 days of getting title. Evidence that you bought it to use, not to resell, can overturn that presumption. In a 1994 letter, the state's tax counsel applied it to a lessee who bought out a lease and sold the car to a buyer the same day without using it.
Everywhere else, check before you pay. States set their own tax rules, and one carmaker's finance company notes in its lease-end guide that some states require you to buy the car through a dealer. Look up your state on our sell my car by state pages, and ask the leasing company what tax it will collect on the buyout.
If you then sell for more than you paid for the car (your adjusted basis), the IRS counts the profit as a capital gain. A loss on a personal car isn't deductible. Do you pay taxes when you sell a car covers how to report it.
If your leasing company will take a payoff from your buyer, route one is usually less work and less cash out of your pocket. If it won't, route two is the way to reach buyers outside the brand's dealers.
| Buyer pays off the lease | You buy it out, then sell | |
|---|---|---|
| Allowed when | Your leasing company accepts that buyer | Your lease has a purchase option |
| What you pay up front | Nothing; the buyer pays the leasing company | The payoff, any sales tax on it, and title and registration fees |
| What you keep | The offer minus the payoff quoted to that buyer | The sale price minus everything you paid |
| Sales tax on the buyout | In Texas, a dealer buying to resell owes no motor vehicle tax on it; other states set their own rules | Depends on your state: Texas taxes it, California presumes a resale within 10 days |
| Main risk | The leasing company refuses the buyer or won't honor the payoff you were quoted | You pay tax and fees, then offers drop before you sell |
Selling before the lease ends usually means buying it out early, and your contract decides what that costs. Federal Regulation M requires the consumer car leases it covers to carry a warning that reads, in part: "You may have to pay a substantial charge if you end this lease early. The charge may be up to several thousand dollars." The FTC warns of the same thing. Read the purchase-option section and the early-termination section of your lease together before you agree to anything with a buyer.
Servicemembers have a way out without the penalty. The CFPB's summary of the Servicemembers Civil Relief Act says you can end an auto lease without early termination charges if:
You give the leasing company written notice with a copy of your orders, and you return the vehicle within 15 days of delivering that notice. The leasing company can still charge taxes, title and registration fees, and reasonable excess wear and mileage charges that were due. If the car has equity, compare that route with selling it first. Returning it under the SCRA avoids the penalty, but it also hands back any equity.
If the payoff is higher than every offer, turning the car in at the end of the lease usually costs less than selling it. You still owe end-of-lease charges. The FTC notes you're responsible for excess wear and damage and any missing equipment. The CFPB notes most leases cap mileage at 10,000 to 15,000 miles a year and may charge for going over. The lease-end guide linked above says that lender's final bill arrives by mail 60 to 120 days after the return.
A damaged or broken-down leased car changes the math. If it has body damage, or a mechanical problem the warranty won't pay for, turning it in can mean paying the leasing company's damage charges. Check first whether your car's warranty covers the repair. Buying it out and selling it as it is may cost you less. Get both numbers first. Ask the leasing company whether it offers an inspection before the return. That same guide recommends one in the 60 days before the return and says the report itemizes estimated wear charges.
Once the car is in your name, its condition doesn't stop a sale. We pick up cars whatever is wrong with them, and we tow the ones that don't run. Selling a car that has problems covers what to tell a buyer about the damage.
Not directly. The leasing company holds the title, so a private buyer can't take ownership until the lease is paid off. The usual way is to buy the car out yourself, get the title in your name, then sell it like any other car. Budget for any sales tax your state charges on the buyout before you list it.
Not always. Some leasing companies quote a payoff for you alone. BMW Financial Services, for example, says the payoff in your account will not be honored if a third-party dealership sends it in. Call the leasing company and ask for the exact figure the specific buyer would pay, in writing, with the date it expires.
It depends on the state. Texas charges its 6.25 percent motor vehicle tax on the buyout price and gives no credit for tax the leasing company paid. California presumes the buyout is a nontaxable resale if you transfer title to a buyer within 10 days of getting it and don't use the car first. Check your own state's rule before you pay the buyout.
It goes back to the leasing company, which already owns it. At the return you may be asked to sign an odometer statement, and the leasing company then bills you for anything still owed, such as excess wear, excess mileage, fees and taxes. One carmaker's finance company says its final invoice arrives 60 to 120 days after the return. Keep your copy of the odometer statement and any inspection report until that bill is settled.
Check your lease and ask the leasing company. GM Financial tells its customers they should not be charged a fee by the dealer to facilitate a payoff. If a dealer asks for a doc, handling or processing fee just to let you buy your own car, ask the leasing company in writing whether that fee is required.
Yes, if the Servicemembers Civil Relief Act applies. For a lease signed before active duty, it covers a call-up to active duty of 180 days or longer. For a lease signed during active duty, it covers deployment orders of 180 days or longer and PCS orders from the continental US to outside it, or from outside it to any new location. Deliver the notice and a copy of your orders to the leasing company, then hand the car back within 15 days of that notice. You won't owe an early termination charge, but taxes, fees and reasonable wear and mileage charges can still apply.