When your lease is up, you have a number of options. And one of those is to keep your car and sell it privately. With the car market (both new and used) still in flux, this might be a very smart and lucrative venture for you. But what is it like to sell a car privately?
Here’s how to decide if you should sell your car privately and what steps you should take to make the most money.
What is the best thing to do at the end of a car lease?
When your car lease ends you have three main options:
Return your car and get a new car lease.
Return your car and walk away.
Buy your leased car.
Every lease has a predetermined residual value. This is the amount that the car is worth at the end of the car lease, and ultimately it is the amount you will need to pay in order to buy your car. The most important thing to remember is that the residual value cannot be altered after your lease is up, so if your car has increased in value, you can still buy it for the low residual value.
This is particularly important in today’s car market. An unprecedented couple of years has created a very competitive car market. All of the following factors have contributed to an increased price in new cars:
Decreased production due to pandemic shutdowns, delays in raw materials, and a microchip shortage.
Increased interest in purchasing a new car due to low interest rates.
Record high inflation.
All of these factors caused the new car market to skyrocket in prices. The average new car in summer 2022 cost $48,301 according to Kelley Blue Book. That’s an increase of 11% in just one year.
An expensive new car market leads to an expensive used car market. So the lease that you are driving around in is worth more than it was anticipated to be worth in your contract. In other words, your car’s actual market value is most likely much higher than your car’s residual value. Buying your lease makes sense now in two scenarios:
You love your car and want to keep it for yourself.
You know you can buy your car and sell it privately for a much higher price.
While it depends on your particular situation, buying your lease may make a whole lot of sense right now.
Where do you get the most money selling your car?
When selling a car you have three main options:
A dealership
An online dealer
A private party
There are pros and cons to each of these options. If you sell your car to a dealer, it will be convenient and easy. The payment to you will be secured, you can avoid DMV paperwork, and it can be done quickly (within one day). But by going to a dealership you will certainly have to haggle, and this may mean you will not get as much as you could for your car.
Selling to an online dealer is also a quick and convenient option. By simply going to their website and filling out some information you can get an instant offer. You will also be offered a secured payment and can avoid the pesky DMV. By going to an online dealer you can avoid the negotiations that will be unavoidable at a physical dealership.
But neither of these options will get you as much money as you can get by selling your car privately. It will always be more lucrative for you to sell your car yourself, but it does require a bit more time, commitment, and patience.
How do I sell my car privately?
Selling your car privately requires some preparation, but it’s most likely worth the time and effort.
Buyout your lease.
When your lease is up (or even before your lease is up) you will need to buy it out. The buyout price will be the residual value of the car plus any taxes and fees that may apply. If you do not have the cash to buy your car outright you can get a car lease buyout loan.
Determine your car’s market value.
As we said before, the residual value of your car will be stated in your lease contract. But that is separate from the actual market value of your car. To determine the market value of your car you will need to do some research online. Kelley Blue Book and Edmunds are great places to start. Your vehicle’s value will be based on the make and model, year, mileage, and the condition the car is in. Your car’s condition will fall into one of four categories:
Excellent Condition. Your car is like-new and in excellent mechanical shape. You’ve never been in an accident and never had any rust, body work, or painting. The engine is clean and works well, you have a clean title history, and it will pass all of its safety and emissions tests. You should also have verifiable service records. Only about 5% of used cars are in excellent condition.
Good Condition. Your car is in great shape for the most part. There may be minor blemishes on the interior or exterior but there are no major body or mechanical issues. Your tires should match and be in good condition with a decent amount of tread. There may be a little reconditioning required for resale, but nothing major. This is where most used cars (especially used lease cars) will fall.
Fair Condition. Your car has a few mechanical or cosmetic problems, but it still runs relatively well. . It may need some work done, there may be some damage from rust, and you may need new tires.
Poor Condition. Your car isn’t in good shape and is running poorly. There may be extensive rust damage or damage to the frame. If your car is in very poor condition, it may not be possible (or worth) selling.
Once you determine your car’s condition you can determine your vehicle’s worth using one of the online tools available.
Gather all of your paperwork.
In order to sell your vehicle you will need to have all of your paperwork in order. You should have the following paperwork:
Car Title. If you used a car lease buyout loan to buy your lease, you won’t actually have the title (the bank will). But have that information available. You don’t physically need to have the title to make the sale, the bank will send it to the new buyer when you send them the remaining payment.
Service Records. Since your car was a lease you will most likely have accurate service records.
Original Sales Paperwork. It’s good to have your original paperwork so that you know all of the options that are available with your car. This can help you bump up the price and give you some extra negotiating power.
Warranty Information. If your car is still under warranty, make sure you have your warranty paperwork. Check to see if it’s transferable as well.
Prepare your car.
To get the best price for your car you want to get your car in its best shape. Here are some of our top tips to get your car looking and driving its best:
Get the interior detailed, or at least do a thorough cleaning. Vacuum and shampoo all carpets and clean the interior surfaces.
Wash and wax your car’s exterior.
Check the oil and other fluids.
Ensure all lights are working properly.
Fix any minor issues that are quick and relatively cheap, like replacing wiper blades.
Take good pictures.
After your car is looking its best, take some good pictures outside. Make sure to get pictures of any special features, such as a sunroof.
Cross advertise for best results.
It’s a good idea to advertise in a few different places to maximize the amount of exposure–and offers–you will get. Tell friends and family, advertise on Facebook, and look for local publications to get the word out.
Show your car–safely.
When people start to contact you to see your car, have a plan as to where you will meet them and how you will allow for a test drive. It is recommended to meet in a public space and bring a friend along for added safety.
Sign the papers.
When your buyer is ready to seal the deal, get payment as soon as possible (a cashier’s check is recommended). Be ready to sign the paperwork over to them. Check your state laws to determine what specifically you need to do to complete the sale.
Selling your car privately requires a little more work, but it can be worth it in today’s car market to sell your leased car.
If your lease is ending, it may be worth it to buy it and sell it privately for a profit. A car lease buyout loan is the perfect way to do this if buying in cash isn’t an option. Contact Auto Approve today to learn more about car lease buyout loans!