Experts say if you leased a vehicle before the pandemic, you’ll want to consider all your options if you're turning it in.
Read on for some questions to ask yourself if your vehicle lease term is ending.
“YOU CAN TURN IT IN AND ACTUALLY MAKE MONEY ON IT”
As a shortage of new and used cars stretches well into 2022, consumers driving leased vehicles may be able to get a deal.
“It is virtually every single vehicle leased three years ago. You can turn it in and actually make money on it,” said Ivan Drury, senior manager of insights for Edmunds.
Edmunds said its analysts looked at the estimated residual values for 2019 model years leased three years ago and compared them to current trade-in values. Edmunds says the average difference was around $7,208.
If you leased your vehicle before the pandemic, check the buyout price or the amount the customer can pay to keep the vehicle at the end of the lease.
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That figure may be below what the car is worth now in the used car market.
“If you buy it for, say, $22,000 and the market value is $30,000 or $32,000, guess what? You have equity in that vehicle that you never thought of,” Drury said.
WHY YOU MAY HAVE EQUITY IN YOUR VEHICLE
The pandemic, chip shortage and high consumer demand have sent vehicle prices soaring.
Michelle Krebs, executive analyst with Cox Automotive, explains world events like the war in Ukraine will likely continue to impact prices.
“Higher oil prices not only will increase your price at the pump, but also anything that carries goods and manufacturing goods,” said Krebs. “The other thing Russia holds a lot of the metals that we use in vehicles.”
QUESTIONS TO CONSIDER
If you’re thinking about buying your leased vehicle, then turning around to re-sell it, you’ll want to confirm what it would cost for you to buy it and compare that to what you could get if you sell it.
Check the buyout rules. They can differ between car manufacturers and lenders.
Additionally, consumers should factor in taxes. The Texas Comptroller’s office says in the most common type of lease, the lessee doesn’t have ownership rights to the vehicle. If a consumer decides to purchase the car at the end of the lease, motor vehicle tax would be due.
Finally, confirm if you’ll have another vehicle lined up.
“Can I live without that vehicle or am I going to need another vehicle? If they're going to need another vehicle, they're going to have a hard time finding anything because inventories are so low now,” said Krebs.
If your vehicle lease term is ending soon, Drury said consumers should set aside some time to do their homework.
“Really line everything up and it will be worth your time if it turns out that you can make $8,000 or $10,000. We're really not talking about like a month's worth of work. We're talking about hours, maybe a couple of days,” said Drury.
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