You probably know that new and used car prices are at historic highs.
In previous articles, I have recommended that you do not buy a new or used vehicle today, because waiting for the microchip shortage to subside and the supply of vehicles to increase will see prices drop by several thousand dollars. .
This tip is especially for those who don’t have another car to trade in. This is because the car you trade in is worth about as much as the vehicle you buy has gone up. In other words, the value of your trade-in more than offsets the increased cost of the car you’re buying.
About a third of new cars on the road today are leased. A lease includes a clause giving you the legal right (option) to buy that vehicle at a price that was set when you leased it about three years ago. This amount is the “residual” and was predicted (guessed) by the leasing company. Often these forecast prices are inaccurate because the markets change. Over the past two plus years with the COVID pandemic, runaway inflation and the microchip shortage that precipitated the vehicle shortage has caused these lease residuals to be far, far below the current market value of your rented vehicle.
Many are unaware of their option to purchase their leased vehicle, and the leasing company or car dealership repossesses the vehicle, sells it at auto auction, and makes a huge profit above your option price.
To take advantage of the increased value, you must first establish the current market value. You can do this by buying your vehicle from several potential buyers. Used car departments at franchise dealerships for the same brand you drive will make offers. Access used car companies online such as www.Carvana.com, www.WeBuyAnyCar.com, www.CarMax.com, www.Vroom.com and many more. Google “Used Car Buyers” and you’ll find many more. It’s a “seller’s market” and the more you shop around for your rental car, the higher the price you will get. Of course, technically you don’t own the car; the leasing company does. But that won’t stop you from hearing the offers. You will need to exercise your call option before you can sell it.
Different leasing companies have different policies on exercising your purchase option. GM, Honda, Toyota and Ally Leasing will sell the rental car to you at the residual price and this is the safest and easiest way. Your leasing company, if they don’t buy your used car, will ask you to return it through one of their dealerships. Unfortunately, most dealerships will add incidental fees, often over a thousand dollars, to the price of your option. If you have to go through a dealership, shop around at dealerships to find the one that charges the lowest additional fees.
If you don’t want to buy and then resell your non-lease car, you may be able to get a lease extension of up to six months. The longer you can wait to make another purchase or rental, the lower the prices will be when you have to commit.
If you own a car now, you can realize all the benefits described above without all the hassle. Just be sure to buy your trade-in from as many used car buying sources as possible. ¦