Yes, you can often trade a leased vehicle in to buy a new car, but it's a transaction that requires careful evaluation. The process, known as a lease trade-in or lease buyout, involves the dealership purchasing the leased vehicle from the leasing company on your behalf and then applying its value toward the purchase of your next car. Whether this is a financially smart move depends almost entirely on your equity position—the difference between the vehicle's current market value and the predetermined residual value (the price to buy the car at lease-end stated in your contract).
If your car's market value is higher than the residual, you have positive equity. This equity can act like a down payment on your next vehicle. However, the current market has shifted from the peak of 2021-2022. Many leased vehicles now have market values at or even below their residual values, meaning you could owe money to complete the trade-in. You must also factor in potential fees from the leasing company, such as a purchase option fee, and whether the dealer can work directly with your leasing company, as some, like Ally and Chrysler Capital, restrict third-party buyouts.
| Key Factor | Description | Why It Matters |
|---|
| Residual Value | The pre-set price to buy the car at lease end. | This is the fixed cost to own the car. |
| Current Market Value | The car's worth based on current market conditions (check Kelley Blue Book). | Determines if you have positive or negative equity. |
| Purchase Option Fee | A fee charged by the leasing company to process the buyout (e.g., $300-$500). | Adds to the total cost of the transaction. |
| Third-Party Buyout Restrictions | Some lenders prohibit dealers from buying out the lease, forcing you to buy it first. | Can complicate or eliminate the trade-in option. |
| Sales Tax | Tax on the purchase price if you buy the car yourself; may be handled differently in a trade-in. | Impacts the final out-of-pocket cost. |
The most critical first step is to call your leasing company and get the official payoff quote. This is the total amount needed to purchase the vehicle today. Then, get a realistic cash offer from a service like CarMax or Vroom, or an online appraisal from the dealer. Compare the payoff quote to the market offer. If the market offer is higher, a trade-in could be beneficial. If the payoff is higher, you are in a negative equity situation, and rolling that amount into a new loan is generally not advisable as it starts you off upside down on the new car.
