[Guide] Making Money with a Short Term Car Lease Takeover

Most people, when buying a car, have a few options to buy a car. They can either buy a brand new car from a dealership outright or via a lease, as well as they can buy a used car from a third party.

I wanted to note a fourth alternative option in this article – buying a used car via a short-term car lease takeover.

Why is this a good option?

If done correctly, there is an option where you may be able to make money off your short-term car lease takeover.

Simply put, you are searching for profitable lease takeover deals based on term length, cost of monthly payments, and the discrepancy between the car’s market value and the buy-out price of the vehicle.

How to Make Money off a Short Term Car Lease Takeover?

To make money off of this strategy, you want to:

  1. Find a profitable car lease takeover deal.
  2. Use the car as your daily vehicle while making the monthly lease payments until the lease expires.
  3. Enact the buy-out with the dealership. Alternatively, you can enact the buy-out earlier if the early termination fees are not that significant.

You might be thinking – what’s the difference between this strategy and flipping cars?

There are a few reasons why this strategy differs. In most cases, the car’s fair value at the buy-out price will be substantially cheaper due to the previous lessee having built equity into the lease (by paying monthly lease payments). Additionally, the dealership may have priced the fair value of the car cheaper than the market value.

Alternative reasons why a lease buy-out could make sense are if there’s significant mileage or wear-and-tear on the leased car. You can most likely persuade the current leasee that there should be a cash incentive for you to take over the car lease.

Essentially, you want to ensure the mathematical expression holds:

Costs + Buy-Out Price of Vehicle < Estimated Market Price of Vehicle

There are specific factors when considering the car lease takeover :

  • Number of remaining monthly lease payments
  • Monthly lease payment (after-tax)
  • Buy-out price of the vehicle
  • The estimated market price of the vehicle
  • Mileage (especially out-of-lease mileage)
  • Wear-and-tear

Additional fees to be observant about are administration fees, as they can be entirely arbitrary since some dealerships will hide these fees in administration fees. Be sure to check how car lease takeovers work in your state or province, as there may a need for a safety inspection needed when a car changes owners in Ontario.

Requirements for the Short Term Lease Takeover Strategy:

  • Good credit score needed to lease a car – An advantage to conducting a lease takeover is you can get generous terms with not-the-best credit. Your current credit may not have given you the best terms, but you can get the same terms with not-the-best credit.
  • Capital for the buy-out – To conduct a lease buy-out, you will need adequate money to purchase the car, which can be funded with cash or through a line of credit.

Overview of the Automobile Loan Market

“Nearly $66 billion of the $1.33 trillion in outstanding loans were over 90 days delinquent in the fourth quarter of 2019, up from $57 billion for the same period last year” – Market Watch.

What does this mean?

Currently, the market of automobile-loan delinquencies has ballooned to proportions more significant than ever expected. For those of you familiar with the sub-prime mortgage crisis in 2008, the “scale of auto loans compared to subprime mortgages isn’t comparable,” said economist Douglas Holtz-Eakin.

The low interest-rate economy makes borrowing money easy for anyone. That said, the automobile industry is an industry ripe for opportunities.

Case Studies – A Profitable and Unprofitable Case

Case Study #1 – 2018 Audi A4 2.0T Progressiv Quattro S Line

To give you an idea of the profitability, I decided to check a few lease takeover deals on Kijiji. The two cars used for comparison are real ads, and although we don’t have the complete details of the lease, we can make a simplification and calculate an approximate value.

For the 2018 Audi A4 2.0T Progressive Quattro S Line, the ad poster has provided the minimum details we need to determine the profitability. However, we are missing additional information, such as the lease transfer fee, buy-out fee, and other fees.

Based on the following parameters highlighted in yellow, it appears the total remaining payments and buy-out value of the car exceeds the estimated market value of the vehicle. For reference, I’ve attached the Excel calculator used to calculate this profit/loss.

Pursuing this transaction is not recommended as it is unprofitable.

Case Study #2 – 2018 BMW M4

For this next transaction, a BMW M4, the ad poster has similarly posted the minimum details needed to determine the profitability. Looking at this posting, the M4 is much more expensive than the Audi A4 given by the monthly lease payments and the purchase value at the end of the lease. However, two details about this transaction look much better: less monthly payments and the seller stating they will cover the transfer fee.

Similarly, using the Excel calculator, it seems like this transaction is much more profitable; albeit, it is more capital intensive.

Based on this transaction and its profitability, looking further into the lease details is highly recommended.


Ultimately, a lease takeover has lots of moving parts. However, it is incredibly worth it if you can find a lease takeover with generous terms. Like, come on – a chance to drive a great car and make a profit off of it? It might just be worth the risk.

In the case studies presented, it is interesting to see that the BMW M4 had a much higher profitability ratio, worth looking into…

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