Auto Lease turn in - Positive equity?

Thundyrkatz

I have a 2016 Honda CRV that is coming up to the end of its lease in May. The dealer is hot to get me to turn this car in early and get into a new lease, and I am generally happy to do that. However, I could use some help understanding if there is any positive equity in the leased car. I have looked around and everything indicates there could be... but never actually discloses how that gets figured. I fully understand how a lease is computed. I have no interest in capitalizing the 3 remaining payments into a new lease, so i'm happy to wait and not do the early turn in. I am definitely leasing a new car, and have no interest in buying out this lease.

Here are some details.

• I l live in Southern NH
• I have excellent credit
• The car is in excellent condition, its a 2016 Honda CR-V EX-L
• Currently at 22,000~ miles of a 36,000 mile lease.
• Residual is $17,700
• KBB shows the trade in value at $20,000

So, that leads me to believe there is some positive equity in the car. I understand that KBB is an estimate, but its something right? Maybe?

We talked to one dealer and they said something to the effect that leases don't work like owned cars and they are based on wholesale and not retail pricing for the equity calculation. But that stank of double talk to try to confuse us, so we left.

Can someone help me understand this better? I appreciate the help!

Enc

I'm confused, why would equity matter in terms of a lease? You don't own the car. Its value in the bluebook or otherwise is immaterial unless you are planning on buying it.

The only part you have agency or control over is if you roll over your remaining payments, choose to purchase it (at which time you might negotiate the value), or go over the stated amount for milage or damage. If your car is worth more than estimated at the end of the lease the dealer just gets a better car to sell and you get nothing.

So really the only thing you can do here to try an capitalize on perceived equity is buy the car and try to immediately sell it, or work with someone like Carmax to facilitate the process on your behalf.

Jasconius

you dont own the car

there is no equity, and there never will be

Thundyrkatz

So, that's a good question Enc, and maybe that is where I am confused. I was thinking that the actual value of the car is higher then the residual vale which could be an asset for me in the new lease negotiation. I previously turned in a Subaru legacy lease and leased this CRV and got a thousand cash in my pocket at the end of the deal. That car was over the mileage, and 3 months from the end of the lease when I turned it in. That's why I thought this lease my be an even better deal.

Enc

I imagine the cash was contingent on signing for the CRV as a signing incentive for paying for another lease, rather than anything at all to do with equity.

Thundyrkatz

This is great perspective Enc, I appreciate that color. Sounds like I may have just gotten a cherry deal last time and not the norm. I think your example of car-max may be worth exploring too. Very helpful!

I welcome if anyone else has any perspective If i missed anything too.

Enc

You may also want to do some calculations on a lease with how few miles you put on the car. Leases usually win out as being more affordable for folks who do heavy driving each year and the cost of the lease for a new car outweighs repair costs. In your case, if low mileage, local necessity driving is generally your thing you probably would save money in the long run buying a reliable low-mileage used car and driving it until it hits 200k miles.

Thundyrkatz

That's the nice thing this time, we are not in an emergency situation and need a car this weekend. Its definitely worth seeing whats available at the price range we can afford. Thank you for your advice.

zepherin

I would honestly buy out the residual. You could probably sell it on the street almost immediately and come out ahead, but if you like the lease, you will only get cash back if there is a lease incentive.

schuss

First step - hit carmax (generally give higher prices) or the dealer and ask them how much they'll buy it for. If more than your buyout, do it. Private sales will get you more money, but are a pain.

Thundyrkatz

Thanks Schuss & Zeph, I have a Carmax near me and I will give them a call at least. Like you said, private sales are a PITA.