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Leasing a vehicle? Consider your options before handing back the keys
The vehicle you leased a few years ago, could be worth thousands more today.
“It’s astounding. There’s no precedence for it in leasing,” Automobile Protection Association’s George Iny told Consumer Matters.
Ongoing supply chain issues, the semi-conductor chip shortage and pandemic-related factory shutdowns have contributed to inventory shortages for both new and used vehicles.
Given the current climate, industry experts say dealerships are more than happy to take your leased vehicle back. “They are really trying to gain that inventory to resell that vehicle at an even higher price than what they are going to offer to you,” Canadian Black Book’s Daniel Ross said.
However, before you hand over the keys, experts say consumers should consider their options.
For starters, determine the market value of your vehicle. Calculate if your vehicle’s current value is above its residual value – your car’s predetermined value at the end of the lease. Is it worth more today?
“We’re seeing people have anywhere between two and eight or 10,000 dollars of equity at the end of a lease,” said Iny.
That equity could go towards another vehicle.
“See if the dealer can kick back any of that value to you if you are threatening to buy it out and then you can use that as a down payment on your next lease and hopefully get you a less expensive lease price and then you get that brand new vehicle again,” Ross added.
If you choose to buy out a lease, Ross says do your research.
“I need to know how many more payments I need to make, what that buyout payment is and see what that car is worth in the retail market,” he said.
Iny says calling your credit or financing company is also important.
“Others will still require you to return to a dealer and some dealers will stick you with an admin charge,” said Iny. “In other cases, it varies between dealers so you might want to shop around.”
As for how long the consumer might have leverage in today’s market, the non-profit Automobile Protection Association predicts it will continue for at least the next 15 months. “What we are concerned about this summer is the market sort of locking up,” said Iny. “What you could end up happening is that it’s a bit like in real estate – prices are just going to skyrocket on used (vehicles) because the supply is so restricted.”
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