How to Sell a Rented Car Profitably
With used car sales up 15% in the last quarter, your rental car may be worth more on the open market than the cost to buy it out. With a little dexterity, you can pocket the difference and make some money. Here’s what you need to know.
Knowing the cost of the rented car
When you rent a car, you are paying to drive a new car that you do not own. Your monthly rental payments are based on the residual value of your car, which is an estimate of how much the car will cost after the lease expires.
Lease balance is based on a specified percentage of the manufacturer’s suggested retail price (MSRP). For example, a rental car might have a manufacturer’s suggested retail price of $ 25,000 with a residual rental value of 50% for a three-year lease, resulting in a residual rental value of $ 12,500. At the end of your lease, you have two options: leave, or buy the car back at the remaining cost (sometimes you have to pay an additional $ 300–400 “scrappage fee”). You also have the option to make an early redemption, the price of which includes the remaining payments and, in some cases, a termination fee.
The new wrinkle here is a pandemic. As a result of a shortage of cars and other factors, there is a sudden mismatch between the market value and the residual value of rented cars – many cars now have residual values that are lower than what they could be sold for on the open market.
The Detroit Free Press has a breakdown of some of the potential gains:
For example, according to Edmunds, the Ram 1500 has an average residual price of $ 24,073 when leased in 2017. In contrast, on the open market, it could have been sold for an average of $ 28,292. That’s a potential profit of approximately $ 4,200.
The average buyout price of a 2017 Toyota Prius Prime is $ 14,971, but the average open market sale price is $ 17,840, which yields a profit of over $ 2,800.
Taking debt in your car
You will want to know how much capital can be squeezed out of your lease to determine if a buyout is right for you. To do this, follow these steps:
- Check your lease or contact your lender to confirm the buyout (or early buyout) price. You will have to pay extra if your car wears out a lot.
- Compare your buyout price to the current market value of your vehicle using online price guides like the Kelley Blue Book or Edmunds , or by getting a real money quote from online car dealerships like Carvana or Vroom .
- Subtract the residual value from the current market price , which will tell you how much you could make selling your car. Whether this difference is big enough for the hassle of buying and selling is up to you (you will also want to factor in your time and money if you plan to sell your vehicle privately).
- If the math is the same, you can buy out the lease and sell the car to dealers or privately. Selling the car will of course be your responsibility and there is always a risk that market conditions may change.