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4 Things to Know About Equity and Your Leased Car
Published 6/27/25
Estimated Read Time: 8 minutes
TL;DR: Car lease equity is the difference between your vehicle's market value and the remaining balance on your lease. Understanding this equity can help you make smarter decisions, like buying out your leased car and keeping the value you've built. By calculating equity and exploring options, you can unlock savings and avoid starting from scratch when your lease ends.
Whether you’re thinking of buying out your car or just curious about how equity works, understanding this concept can help you make informed decisions.
Let’s dive into what car lease equity is, how it’s calculated, and why it matters when the lease term ends. And if you’re ready to unlock that equity, through a lease buyout (enter your VIN or license plate number if you want to start that process now).
1. Equity Basics: What Does It Mean?
TopEquity is essentially the portion of an asset that you own.
Consider an asset like a home. Whoever owns it likely has—or at one point had—debt that was used to purchase and own it. (For homeowners, that debt is a mortgage.)
Generally, the goal is to pay off a debt and own the asset entirely. But that might take a long time, or the asset may even be sold before then, so we need a way to describe ownership of the asset along the way.
A better definition of equity, then, is what you’d be left with if an asset was liquidated (or sold) and any and all debts were paid off.
Example of home equity
- You buy a house for $500,000 and take out a mortgage for $300,000.
- You pay off $200,000 of that mortgage over time.
- You sell the house for $500,000, and after paying off the remaining mortgage, you pocket $200,000—your equity.
Example of Car Lease Equity
Car lease equity works the same way. It’s the positive difference between the car’s current market value and the remaining balance of your lease (also known as the "buyout" amount).
For example, if your leased car is worth $20,000 but your buyout amount is $15,000, you have $5,000 in equity.
2. How to Calculate Your Car Lease Equity
Top2. How to Calculate Your Car Lease Equity
To determine how much equity you have in your leased vehicle, you need to know two things:
- Your car’s current market value: You can estimate this by using online valuation tools like Kelley Blue Book or Edmunds, or you can get an appraisal from a dealership.
- Your lease payoff amount: This is the amount you’d need to buy out your car. You can find this in your lease agreement or by contacting your leasing company.
Once you have these numbers, simply compare the two:
- If the car’s market value is greater than the payoff amount, you have positive equity.
- If the payoff amount is greater than the car’s market value, you’re in a situation where you might owe more than the car is worth.
3. Car Equity Specifics: Is It Really Yours?
TopIn most leases, you’re not technically the owner of the vehicle—but you can access the equity if you exercise your buyout option. So, while you don’t own the car outright during the lease term, you can still build equity.
For example, let’s say you lease a car with a MSRP (Manufacturer’s Suggested Retail Price) of $50,000, and the lender sets a residual value (estimated future value) of $30,000 at the end of the lease.
Here’s how it works:
- Over the course of the lease, you’ll pay off the $20,000 difference (plus any fees and interest).
- If the car’s market value at the end of the lease is higher than $30,000, you have equity.
- If it’s lower, you’re not responsible for that loss—you can simply return the car and walk away.
4. Why Equity Matters
TopEquity is a key consideration for car leases because it gives you flexibility at the end of your lease. The amount you’ve paid into the car over the lease term (for depreciation, interest, and fees) is similar to paying off a mortgage.
Implications of home equity
If you bought a house for $500,000 and had to sell it for $400,000, you would lose money. You’ve invested $500,000 but only got $400,000 back. Similarly, with a car lease, if your vehicle’s market value is less than what you’ve paid over the lease term, you don’t "own" the asset, and the return on your investment is negative.
Implications of car equity
However, if your car's market value is greater than what you've paid, that’s equity you can access. Let’s break it down:
- You leased a car worth $35,000 with a predicted residual value of $21,000.
- Over the lease term, you paid $20,000, covering depreciation, interest, and fees.
- At the end of the lease, if the car is worth $28,000, you have $7,000 in equity.
You can choose to either walk away or buy out the car and either keep it or sell it for a profit.
Buying out or trading in a leased car with equity
Generally, you have two options for ending a lease: turn it back in to the dealership in favor of another, or buy it out (and then keep or sell it). If your lender was right on the money, and your car’s market value is $21,000 when your lease is over, you might be more inclined to just turn the car back in.
Trading in a leased car with equity can be a smart financial move. If your leased vehicle has equity, you can use it as a down payment or to reduce the capitalized cost of your next vehicle. This can lower your monthly payments or help you qualify for a more expensive car.
However, not all leasing companies allow you to trade in a leased car with equity, so it's essential to check your lease agreement or contact your leasing company for specific rules.
But let’s say your lease-end rolls around, and after some browsing online, you find out that the car you’ve been leasing—with similar mileage and condition—is currently going for around $28,000. If you turn the car back in to the dealership, they could sell that car at that price—or more—and get money back on an investment that could have been yours.
The thing is, you can access that equity, too. If you buy out your leased car for $21,000, the residual value of the car, you could sell it for $28,000.
Let’s review the numbers one more time.
The car you leased was valued at $35,000 brand-new, and you’ve paid $20,000 over 3 years to drive it. That $20,000 is equity you’ve put into the car.
When you reach the end of your lease, it may feel tempting to just walk away—after all, buying out a leased car is just spending more money, right? But if you don’t buy out a leased car, you’ve just spent $20,000 on an asset you won't ever own.
Assuming you’ll still need a car at the end of your lease, you have the option to
- Buy a brand new car,
- Try and find a good deal on a used car, or
- Keep the car you’ve already been driving at an (often) below-market price.
Buying out your leased vehicle means taking advantage of the equity you’ve already invested into your vehicle—without starting over from scratch.
So, how exactly can you do that?
5. How to Unlock and Access Car Equity
TopThe only way to fully unlock your car lease equity is through a lease buyout. This means you purchase the vehicle for the predetermined buyout price, which is set by the leasing company.
Here’s how a lease buyout works:
- Determine the buyout amount – The buyout price is usually listed in your lease agreement or can be provided by your leasing company.
- Obtain financing – If the buyout price is more than you can afford upfront, you can secure a loan through Lease End or another financing partner to cover the cost.
- Make the buyout official – Once you purchase the car, it’s yours. You can then either keep it or sell it for a profit.
Why Buy Out Your Lease?
By buying out your lease, you’re essentially locking in the equity you’ve already invested in the car. You’ve already made payments toward the car’s depreciation, and if it’s worth more than the buyout price, buying it out means you keep that extra value.
- If you keep the car: You now own it and can continue driving it, often at a lower monthly payment than before.
- If you sell the car: You can make a profit if the car’s market value is higher than the buyout price.
Final Thoughts: Making the Most of Your Lease Equity
Understanding and unlocking car lease equity can be a powerful financial move. Whether you want to buy the car, trade it in, or even sell it, equity gives you the freedom to make the best decision for your situation. And if you'd like to know how to maximize your lease equity, we cover that here.
According to Lease End COO Zander Cook, the biggest myth about leasing is that you have to go back to the dealership to end your lease when in reality, you can buy out your lease from the comfort of your home!
We want drivers to know that they have options—options that can save both time and money.
If you're ready to chat through your options with a dedicated financial advisor, give us a call at 888-307-5197 to get in touch with one of our lease-end experts.
To start the process online, simply fill out the form below.
You can also try our Monthly Payment Calculator to get a rough estimate of your monthly payment for a lease buyout auto loan.
About the author
Sarah Williams
Sarah loves breaking down complex topics and making them accessible to everyday readers. With four years of experience writing in the fintech and auto industries, she’s helped shape Lease End’s voice and given consumers the confidence they need to tackle leasing topics.
Lease End's mission is to empower auto lease owners with the technology to easily exit their lease. If you'd like to learn more about the lease-end options available to you, please don't hesitate to contact us. Our expert advisors are always prepared to answer your questions and are committed to finding the right plan for your individual needs.
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