If you are nearing the end of your financial lease, known as leasing, in today’s market, it might be a good idea to buy the vehicle from the leasing company. Most contracts include a clause to purchase the vehicle at a pre-calculated price established at the beginning of the contract. In normal times, it is not usually a good deal, but due to the shortage of supply of new and used cars and for the prices on the rise, the purchase price could mean a great saving and real capital in the vehicle, if you later sell it to a third party.
“It was impossible for the people who drew up the contracts I knew a few years ago that those cars would be worth so much today, ”explains Jake Fisher, senior director of the Consumer Reports Auto Test Center. “That means they’ve probably already agreed to sell you a car for a lot less than it’s worth today.”
For example, Jen Stockburger, COO of the Auto Test Center. Center) of CR, noted that the purchase price of a Subaru Impreza 2018 he was leasing was much less than the market value of the car when you first looked up the price about two months ago. He decided to buy the car he had on lease for $ 15, 400, after doing a quick online search that showed CarMax would give you $ 18,000 by him, a bonus of more than 14%. Possibly, he would have sold it for more money at a private sale, but he ended up keeping the car. Stockburger looked back at this article, and as of July 30, CarMax was offering even more: $ 18, 400, or almost 17% above the purchase price of the lease.
“Just as easily, I could have bought the lease and then sold the car and made some money,” says Stockburger.
According to data from TrueCar, a company that tracks the automotive industry and is a partner of CR, used car prices increased by 35% in June of this year compared to June of 2018, when many of the calculations for the cars that are now being leased. “There is a strong relationship between purchases and used prices,” says Nick Woolard, analyst at TrueCar. “When used prices are low, more customers leave and let the dealer keep the vehicle.”
Why did the prices go up
When the car lease ends, many consumers simply decide to hand over the vehicle and rent a new one of the same maker. But the statistics have changed lately due to the pandemic and the global shortage of the microchips needed for new cars, and this made the prices of new vehicles
While everyone stayed home last year, and no one bought cars, the semiconductor manufacturers that supply automakers with the microchips they need to Building cars found themselves in a quandary when auto companies shut down production lines, to keep workers safe and to cope with the sharp drop in demand for new cars. It’s not good for any business to have unused stock, but luckily for semiconductor manufacturers, demand for chip-requiring products that people use at home has skyrocketed, such as televisions , tablets , smart appliances and others like it. Chip companies found a destination for their product.
Earlier this year, consumer demand for new and used cars returned strongly. Automakers needed microchips, from 30 to 100 per car, but suppliers were focused on other products and reeling from countless challenges, including a fire at a major chip factory. The semiconductor industry is working to adapt to the new demand, but it is taking time to get going. The Wall Street Journal reported this week that Intel CEO Pat Gelsinger predicted the chip shortage could extend to 2023. Intel is a major manufacturer of microchips.
Due to shortages, automakers slowed and stopped production of new cars, reducing availability of new cars and increasing demand for new cars. used models.
What does this mean for your leasing contract?
According to TrueCar, almost all Leasing contracts have a purchase clause that allows the consumer to buy the car at any time during the lease. But the depreciation rate is pre-calculated, so the leasing company cannot change the purchase price based on current market conditions. Although the extremely high prices of used cars have put many consumers in a difficult situation, they are a boon for people who want to purchase on a lease.
“The situation warrants, at the very least, taking the time to get an estimate of the vehicle’s value and compare it to the price of the lease,” says Nick Woolard of TrueCar.
Basically, there are two options for purchasing a leasing contract. You can purchase the lease and own a car for much less than what you would pay for the same model if you bought it from a dealer or private seller, or you could purchase and then sell the car yourself. Consider that many manufacturers may not allow the purchase of leased vehicles by third parties: the case in which the consumer exercises the option to purchase the lease, but transfers the vehicle directly to a dealer or other buyer to avoid paying taxes about sales. (TrueCar says that most states require buyers to pay sales tax when ownership is transferred from the leasing company.) If there is such a contractual limitation, you should sell the car yourself. Also, check if there are fees for the interruption of the leasing contract in case you decide to buy it in advance.
The best option for you depends on your situation. If you no longer need the car (because, for example, you now work remotely), buying and selling might be a good option. However, if you still need the car, sticking with the one you have can be advantageous. For starters, a leased vehicle may still be under warranty. Even if it doesn’t and you need repairs, CR recommends looking at the cost of repairs on the car you already have. There are two reasons for this: first, another car, new or used, is likely to be more expensive than it would be under normal circumstances; Second, you are already familiar with your car’s problems, while a new one may have unforeseen problems. It might be better to repair the car you already own .
Consumer Reports is an independent, nonprofit organization that works side by side with consumers to create a fairer, safer, and healthier world. CR does not endorse products or services, and does not accept advertising. Copyright © 2021, Consumer Reports, Inc.
Consumer Reports has no financial relationship with the advertisers on this site. Consumer Reports is an independent nonprofit organization that works with consumers to create a just, safe, and healthy world. CR does not endorse products or services and does not accept advertising. Copyright © 2021, Consumer Reports, Inc.