Published on April 21, 2022
When it comes to autos, there are three distinctly different types of consumers: those who only buy new, those who only buy used, and those who only lease.
Which one are you?
If you happen to be one who prefers to lease, the current economy is one of the rare instances when you’re in the driver’s seat.
In the past, the only consumers who bought out their leases were either way over their mileage or they simply loved their car and couldn’t live without it. In today’s economy, it might be smart to buyout your lease because, depending on your needs, you could end up with some extra cash.
If you have a lease that’s due soon, it means you originally agreed to the price of your buyout either 24 or 36 months ago. You might have noticed that the price of used cars is up nearly 40% from last year alone. New cars prices are up 12%.
What that means is you can buy your lease for far less than the dealer would sell it in their lot. How much less? A lot less!
The reason for the faster increase in used cars comes down to basic economics: supply and demand. With increasing labor costs and a global shortage in microchips, among other factors, there simply are not enough new cars available. That means buyers are looking for used cars. Increase the demand and the result is increased cost.
If you’ve ever considered either buying your lease because you just love it or taking the time to buy it and then resell it, this is it. You’re a winner either way. As your credit union, we love it when you come out ahead.
Back to your lease.
Our lending experts advise you to log onto NADAguides.com and punch in your make, model, car extras and then look under “clean.” That’s the value, or close to it, of your leased car. Then head back to your computer and start looking around for how much you could sell your car for.
Here’s an example: 2019 Ford Escape with all the extras and low mileage could be worth up to $30,000. Remember, that’s the value of the car, not what you’ll get for trading it in. That will likely be $2,000 to $4,000 less.
If your lease buyout is $18,000 (that was the projected value of the lease 36 or so months ago, before COVID, inflations, a chip shortage, and so many other factors that drove up the price of cars in 2022), you can see right away that your buyout price is much lower than the market value of the car.
Then what do you do?
With such a financial benefit to gain, you may want to get creative on how to manage without your primary or secondary vehicle for a few days or weeks. Take note: Getting your title after paying off your lease can take some time, up to a month. So, plan things out carefully if you’re considering purchasing a lease and then selling it.
If you’re not cut out for selling your car privately, check out this website for a list of online ways to sell your car. It’s also a good idea to do your homework and bring the prices you found to the dealership with you. This gives you a little bit more bargaining power when it comes to negotiate your trade-in price.
Remember, the price for your trade-in will vary with the dealer or private buyer, and then there will be other costs for securing your title and a variety of other factors, so take the time and see if this is a good option for you.
If you’re in the market for new or used car and want some advice on best options, give our lending team a call 877.243.2528 ext. 2200. They can help you make a smart decision when it comes to financing, selling, and purchasing.
If you’re in the market for a new or used vehicle, log in to e-Banking to see you have an offer in My Special Offers for a preapproved auto loan.
If you’re ready to start crunching some numbers, we have some online calculators that will come in handy.