The common wisdom is that it’s more expensive to lease a car than to buy one. But the recent rise in used-car prices may provide a lucrative opportunity for those with leases to come out ahead of the game.

That’s because dealers set a so-called residual price when they lease a car — what the car is expected to be worth at the end of the lease. Typically, consumers can either turn their car in when the lease is up, or buy the car for the residual value. (If they want to buy it before the lease is up, the price is called the buyback amount.)

Now, with a spike in used-car prices as a result of tight supply, it’s likely that many residual values are significantly lower than the current market value of the car. That means that people whose leases are ending now — or who want to exit their lease early — can expect a good deal if they buy the car, or can even turn a tidy profit by selling the car themselves and pocketing the difference.

An article published Friday describes a Prius owner who did just that: Spencer Hunter, an Oregon lawyer, tells how he sold his Prius less than 72 hours after he posted an ad on Craigslist. Over the 13 months he leased his 2010 Prius, Mr. Hunter said he spent $3,860 on the car, not including gas. Last month, after buying out the lease and selling the car, he ended up with a check for $3,900 — a profit of $40.

Michael Bor, co-founder of a new used-car consignment business called CarLotz, which helps owners sell their cars for a fee, says other leases may also have residual values that are worth much more. “Not until recently have used-car values appreciated so much,” he said.

During the economic downturn, new-car sales — and the trade-ins that often accompany them — slowed sharply, so there are now fewer used cars available for sale. Roughly 60 percent of new-car sales involve trade-ins, said Paul Taylor, chief economist for the National Automobile Dealers Association. (The current situation is the reverse of what happened from 2005 to 2007, when there was a boom in new-car sales, and trade-ins flooded dealerships with used cars.)

Given the rise in used-car prices, it’s probable that forecasts for residual values made over the last three to five years, the typical duration of auto leases, were low. “What’s likely to happen now is they underestimated the value of the car,” Mr. Taylor said. “So the residual price is low, and you have more incentive to purchase it. Or, buy it and then sell it.”

Mr. Bor is in favor of selling. In the past, he said, if you turned your car in at the end of a lease, you weren’t giving up much value. “Today, if you hand the car over, you might as well put a suitcase full of hundreds in the trunk.”

He gives the example of his wife’s car, a 2008 Volvo XC90. Her lease has more than a year left, and when they called the finance company this week, they were given a buyout price of $18,500. She could arrange to sell it privately, he said, for about $27,000, based on values found at online sites like Autotrader.com, and industry sources like Manheim. She could then pay off the balance and keep the $8,500 difference, or use part of it for a down payment for another car. Prices vary geographically, and by model (prices have risen the most on smaller, fuel-efficient models), so her case is perhaps an extreme example, he said. But it’s likely that residual values on many leases offer significant “hidden” savings.

Car leasers may be catching on to the idea. According to CNW Marketing Research, an Oregon company that follows car trends, 21.8 percent of car leasers are now buying their vehicles, up from a historic average of 16.4 percent. Of those who buy the leased car, nearly 40 percent sell it within six months, compared with 27.3 percent historically, CNW said.

Typically, the car’s residual value is listed on the lease documents. Or you can call the finance company for a payoff amount, if you still have time on your lease. The market for used cars is brisk right now, but if you go the sell-it-yourself route, Mr. Bor said, you should start planning to do so at least a month or two before your lease expires.

The downside, of course, is that selling the car yourself, instead of simply handing over the keys to the dealer, requires a significant investment of time and energy that many people don’t want to make. Many dread the hassle of advertising the car on Craigslist or other online sites and dealing with strangers who want to test-drive it.

That’s where Mr. Bor sees an opportunity for his business, which recently opened its first location near Richmond, Va. CarLotz sells the car for fees and a commission totaling about $800; the seller keeps the rest. Out-of-state sellers can ship him cars to sell and still make a profit, even with the fee, he claims, because prices are so high.

Do you lease a car? Is its market value greater than its buyback value?

Article source: http://feeds.nytimes.com/click.phdo?i=04c29bfbbce9424c95e4810ceb258a83