If you do not have enough money to handle buying a new car, and you want to avoid driving a used one, the best choice that you can make is to take a leased vehicle. But before you do it, you should check its value along the way.
Leasing companies can predict what vehicles and models will be accessible and how much they will be worth at the end of the lease term.
We are talking about residual value, which is the primary basis on the calculation, and it represents the amount for which you wish to buy a car when you are at the end of the lease.
It doesn’t matter if you wish to consider a Silverado 2500 or any other model, because in all cases you will be able to pay less than it is marketed. But let’s start from the beginning:
What is Leased-Car Equity?
We have mentioned above that most leasing companies are good at predicting the residual value. Since the fluctuation in the marketplace and industry, some vehicles could worth much more than its residential value.
Since you will be able to purchase a car after the lease term finishes, you will be able to profit from the inaccurate estimation and value. At the same time, in case that the vehicle is worth less than its residential value, you have to turn the car in without paying an additional expense.
In some cases, people tend to use the equity when they decide to return the lease car and use it as down payment so that they can purchase the next vehicle. That will provide you the ability to enjoy in lower monthly payments than before, and you can get most out of it.
If you do not know what equity is, click here to learn more about it.
However, you should understand that not all cars feature equity, but as the return date reaches the point, you should check the market value and compare it with equity.
For instance, if you have the latest SUV and you are next to the end of the lease. You cannot get a turn in the situation because it features minor body damage, and you have to pay additional funds for mileage fees and disposition fee, which are most common expenses that you will make at the end of the lease.
If you want to arrange to sell the car to the dealer, you will be able to pocket money for the equity. You can also get equity from leased vehicles on other areas too. In some cases, you will be able to sell your leased car in the same way as another financed car. That will provide you with the possibility for the company to process every single equity that you might have.
How To Determine Whether You Have Equity In Your Lease?
If you want to use the possibility of equity, it is vital to determine whether you have it. Some tools online can also provide you with a clear perspective that will help you learn the value and trade in value of your vehicle.
Visit this link: https://en.wikipedia.org/wiki/Equity_(finance) to learn why determining equity is vital.
The residential value will remain in your contract. The idea is to subtract the residential amount from the current market value, and that is the equity you can have and that you can negotiate with the dealer. By knowing the current market value of your car, you will be able to create a foundation that will help you get equity and turn it into cash.
In case that your car is year or more away from the end of the lease term, you should wait until it reaches the momentum. However, you can still consider the equity and call the leasing company to determine the buying price. You should subtract buyout price from current market value, and you will notice whether you have equity or not.
How To Turn Equity Into Cash
In case that you have equity in your leased car and you calculated it by using steps we’ve mentioned above, then you should learn how to turn it into cash. We are talking about advanced car financing: