Question: When I trade or sell a leased car do I still owe money on it?

September 18, 2005

Hello Tony

I have a Honda that I leased. I signed the papers, but people need to know what they are signing.

When you lease a car you are going to pay that lease contract no matter what. The car value is a different part of the deal.

Trading in or selling the leased car does not let you out of the lease, you still owe the rest of the lease contract even if you do not own the car. Them can be a lot of dollars!

Please tell me if I am wrong. I think your readers need to know this about a lease deal.

Ron S.

Answer:

Hi Ron,

Ron, a lease is just another way of financing a vehicle. While it's true that once you sign on the dotted line you are locked in to pay the lease you can still sell the vehicle or trade it in or for that matter buy it yourself providing the entire lease payoff is paid off.

The entire lease payoff consists of the amount of the payments plus the residual value that is usually set at the beginning of the lease ( but not always). Also there may be some additional fees they slip in on the deal, but the bottom line is that you can pay off the entire lease contract.

If you sell the vehicle or trade it and the above criteria is met the deal is done. There would be no payments left to pay. It's very hard to do this because the entire payoff is usually very high and it's hard if not impossible to get someone or a dealer to give you that much for the vehicle.

To find out the payoff on the lease all you have to do is call the lease company and ask for the total payoff. Tell them you are considering selling the car. They will give you the amount needed to - in essence - buy the car.

I hope this helps.

All my very best...

Tony Iorio