What is Equity in Car Leasing and How to Know If You Have Any

Equity in a car lease (or loan) exists when the value of a vehicle exceeds the amount remaining on its lease or loan. The amount of the difference is called equity.

It’s also possible to have negative equity — when a vehicle’s value is less than the amount remaining on its lease or loan. We discuss that case in this article.

How to Know if You Have Equity

You might be interested in whether you have equity at two different times with your lease — during the lease, and at the end. Your interest might be that you are considering ending your lease early and need to know if you can exit without further cost. Or you might be interested in knowing if you have equity that can be used in a trade for another vehicle.

If you are still in your lease, you can call your lease company and ask for your early termination cost (if you simply want out of your lease). The lease company assigns a realized value for your vehicle, which should be close to current wholesale market value, and subtracts your remaining lease balance and fees. The result is your equity, either positive or negative. If positive, you’ll get a check from the lease company. If negative, you’ll be the one writing a check to them.

If you want to purchase your vehicle before your lease ends, you’ll need to ask your lease company for your lease buyout cost. Compare that cost to the value of your vehicle as determined by online car value guides such as Kelley Blue Book, Black Book, and NADA Guides. If your car is worth more than the buyout cost, you have equity. You can then decide if buying the vehicle is worth it to you.

If at the end of your lease, your buyout cost is the purchase option price that is in your contract. Again, consult with the online car value guides mentioned above to determine if your vehicle is worth more than the lease-end purchase price. If so, you have equity that you might use in a trade, or by purchasing and selling to recover the equity.