Car prices are all over this place right now, but is there another option out there? Consumer Reports suggests buying out your current lease instead of trying to buy an overpriced used car. Before making any decisions, be sure to compare prices from places like CarMax, Auto Trader, and other online retailers.
Consumer Reports says your current used car is a better deal
Are you constantly searching for a car that isn’t outrageously priced? Consumer Reports suggests that if you currently have a lease on a vehicle, why not try and use that to your advantage? The buyout price for your current lease might be lower than the market value of the car. This is a good idea if you are nearing the end of your lease and have to decide soon.
At the start of the lease period, the company should have included a recalculated buy-out price in the paperwork. During regular times, this price might not be a good deal. However, these are not regular times. The buyout price could mean significant savings instead of selling to a third party.
Jake Fisher of Consumer Reports’ Auto Test Center said, “There was no way for the folks that drew up leasing contracts a few years ago to know that those cars would be valued so high today.” So whatever value your car was when your lease began is going to get buyers a better deal.
Consumer Reports says that buying a used car out of a lease might work
Jen Stockburger from Consumer Reports Auto Test Center put this theory to the test. The buyout price of a 2018 Subaru Impreza was less than the market value about two months ago. Stockburger decided to buy the Impreza out of the lease for the price of $15,760. CarMax would offer $18,000 for it, a 14% premium. A private sale might have offered more, but it is also more of a hassle.
Stockburger kept the car. By the time July rolled around, CarMax was offering $18,400 for the same vehicle. CR notes that TrueCar found that used vehicle prices were up 35% in June this year compared to June 2018. Many of the cars coming off lease now were being leased at that time. Nick Woolard from TrueCar said, “There is a strong relationship between buyouts and used prices. When used prices are weak, more customers walk and let the dealer keep the vehicle.”
While supply is still low, leaseholders might have an upperhand
Typically when a leased car reaches the end of the lease period, many people turn in the car and pick another one to lease from the same manufacturer. But since the supply is so low, the prices of used and new vehicles are at an all-time high. During the pandemic, automakers were hit with supply chain issues and issues staffing production plants.
There has been a sharp decline in the supply of cars, while the demand has only gone up. Automakers have still not recovered, production-wise, and the availability of new vehicles is still low.
If your lease is coming to an end, it is worth it to get an estimate to see what your car is worth. You can use this information to compare it to the value noted on your lease contract. You can buy your current used car for much less than you could get it elsewhere. Or, you can buy your car and sell it to make some money. Either way, your leased car might offer a solid buying opportunity.