Lease Equity5 min read

Does your current lease have equity? Here's how to check before you turn it in.

In today's used car market, your lease buyout may be less than what the car is actually worth. That difference belongs to you — if you know to look for it before you hand over the keys.

What is lease equity?

When you sign a lease, the contract includes a buyout price — also called the residual value. This is the amount you can pay at the end of the lease to purchase the vehicle outright. It's set at the beginning of the lease and doesn't change regardless of what happens to the car's market value over the next 36 months.

Lease equity exists when the car's current market value is higher than your buyout price. If your buyout is $28,000 and the car is worth $34,000 on the open market, you have $6,000 in equity. That $6,000 is yours — but only if you act on it before turning the car in.

If you simply return the vehicle at lease end without checking, that equity goes to whoever buys the car next — often the dealership, who turns around and sells it used at a profit.

A real example

On one of my truck leases, I noticed the market value had climbed well above my buyout price. I exercised the buyout, purchased the vehicle, then sold it back to a dealership the same week. I walked away with a check for nearly $4,000. The dealer would never have mentioned this — they were counting on me to simply return the keys.

The tax factor — what most buyers miss

Here's something that catches a lot of buyers off guard: when you exercise your lease buyout, most states charge sales tax on the full purchase price — not just the equity. In Michigan, that's 6%. On a $28,000 buyout, you'd owe $1,680 in sales tax at the time of purchase.

That doesn't mean the equity isn't worth pursuing — it often still is. But it means your real calculation is: market value minus buyout minus sales tax = your actual net equity. That's the number that matters.

Tax rates vary by state. Michigan is 6%. Illinois is 6.25%. Ohio is 5.75%. Check your state's rate before making a decision. Our calculator below factors this in automatically.

How to find your buyout price

Check your lease agreement

Your original lease contract lists the residual value. It's usually on the first or second page under 'Residual Value' or 'Purchase Option Price.'

Log into your account

GM Financial, Ford Motor Credit, Hyundai Motor Finance, and most captive lenders have online portals where you can see your current payoff amount.

Call the finance company

Call the number on your lease statement and ask for your 'lease-end purchase price.' They're required to give you this number.

What to do if you have equity

Use it as a down payment on your next lease

Exercise the buyout, then use the equity as a down payment when you lease your next vehicle. This can significantly lower your monthly payment. Factor in the tax cost when deciding if this makes sense.

Sell it to a dealership

Many dealers will buy your leased vehicle directly. They pay off your buyout with the finance company and write you a check for the difference. CarMax and Carvana also buy leased vehicles this way — and neither charges you for the transaction.

Sell it privately

Selling privately typically gets you more money than a dealer will offer. The tradeoff is the time and effort involved. You still pay sales tax on the buyout either way.

Lease Equity Calculator

Do you have equity in your lease?

Enter your vehicle details and buyout price for an estimated equity check. For an exact number, get quotes from CarMax, Carvana, or your local dealer.

⚠️ Important before you calculate

When you exercise a lease buyout, most states charge sales tax on the full purchase price. This calculator factors that in so you see your real net equity — not just the difference between market value and buyout. Enter your state's sales tax rate below.

Year

Make

Model

Current mileage

Condition

Smoker vehicle?

Your state sales tax rate (%)

Your lease buyout price ($)

Frequently asked questions

What is lease equity?

Lease equity is the difference between your vehicle's current market value and your lease buyout price. If the car is worth more than your buyout, the difference is equity that belongs to you — minus any sales tax you pay on the buyout.

Do I have to pay sales tax when I buy out my lease?

In most states, yes. When you exercise your lease buyout option, the transaction is treated as a vehicle purchase and sales tax applies to the full buyout amount. Tax rates vary by state — Michigan is 6%, Ohio is 5.75%, Illinois is 6.25%, California is 7.25%.

Can I sell my leased car if it has equity?

Yes. You can exercise your buyout option and then sell the vehicle — either privately or to a dealer. Many dealers, CarMax, and Carvana will purchase leased vehicles directly, paying off your finance company and writing you a check for the equity.

Where do I find my lease buyout price?

Your original lease contract lists the residual value. You can also find your current payoff amount by logging into your lender's online portal or calling the number on your lease statement.

What if my car is worth less than the buyout?

Simply return the vehicle at lease end. One of the key advantages of leasing is that you're protected if the car's value drops below the residual — you just walk away with no obligation.

Can I use lease equity as a down payment on my next vehicle?

Yes — this is one of the most common ways to use lease equity. The equity reduces the capitalized cost on your new lease, lowering your monthly payment. Just factor in the sales tax you paid on the buyout when calculating your true net benefit.

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