Buying your rental car could save you money now


For many people, buying back a leased vehicle at the end of its term generally does not make economic sense. The pandemic has changed that equation, at least for now.

At the end of their lease, many people return their old vehicle and lease a new one. They like to drive something new. And when they see how much they would have to pay to buy out the lease, they see it’s not worth it.

But inventory issues are driving car and truck prices up 16% in the past year and 50% more than before the pandemic, according to fortune. This means that the market value of the vehicles being leased is often much higher than the cost set by the finance company two or three years ago to buy out the lease at the end of its term (the residual amount). You may find that buying your vehicle when it comes out of lease will result in a windfall.

Seattle’s Eric Steinmetzer was “excited and thrilled” to find out how much things changed when his Cadillac Escalade’s lease ended. The residual value, which had been fixed three years earlier, was so much lower than the current value that he decided to buy the car.

“So instead of looking for another lease, like I normally would, I just went ahead and financed my car because of the high value it had,” Steinmetzer said. “I was able to stay in a great car that I loved and reduced my payments by $500 a month. It was free money.”

Robb McCalmon, general manager of Kendall Chevrolet and Subaru in Marysville, has been in the business for over 20 years and he’s never seen anything like this before.

“With a lease, the manufacturer takes all the risk,” McCalmon told Consumers’ Checkbook. “If the car is worth $20,000 at the end of the lease and your buyout is $25,000, you can just return it and the manufacturer takes care of the loss. Well, it’s the opposite now. People come to the end of the lease. lease, and they are in a good position.”

It’s not uncommon for lease customers to have between $4,000 and $6,000 in equity, McCalmon said. With some luxury vehicles, this equity could be higher.

If the residual value is higher than the market value, but the customer still wishes to return their leased vehicle, dealers will apply this net value towards the purchase or lease of another vehicle.

“Some people come in and they have $5,000 capital, and they buy or lease a new vehicle and walk away with a lower monthly payment,” McCalmon noted. “And in a market where payouts normally increase due to inflation, they’re doing pretty well.”

Desperate for used vehicles, some dealerships are letting customers return their car with a few months left on their lease, making final payments for them and waiving early termination penalty fees.

You can get a rough idea of ​​your car’s value by checking Edmunds.com Where Kelley’s Blue Book.

When I bought a new car a few years ago and traded in the old one, I got the best deal by taking the car to a dealership. With the current used car shortage, some dealerships are paying top dollar for clean, well-maintained, low-mileage used vehicles.

Advice adjusted for the current market

Unless you have specific business or tax reasons for leasing, or you buy a new car every two or three years, consumer advocates generally advise buying rather than leasing a new car to save money. long term money.

But for those who already have a lease, auto experts recommend that you consider buying this vehicle when the lease is in effect, as it could be an economical decision.

“It usually doesn’t work to buy your leased vehicle because the leasing company will always create the terms of the contract in their favor, but those are special circumstances,” said Ben Preston, automotive journalist for consumer reports. “The price you are currently paying for a lease buyout, because the price was calculated before the pandemic, could be lower than the market value of the car. So if you were to buy that same car on the car market of opportunity, you’d probably pay a lot more for it.”

Jack Gillis, author of “The car book,” and board member of Consumers’ Checkbook, points out that buying your car at the end of the lease reduces the risk of buying another used car with mechanical or safety issues.

“You know exactly what experience you’ve had with this car,” Gillis said. “If you’re buying another used car, you’re really buying a pig in a poke, because you really don’t know what experience (the previous) owner had. So if that car has treated you well and you like buy it and you could save thousands of dollars.”

Renting usually costs more in the long run

It’s easy to see why renting is so attractive. Monthly payments are lower than purchase, down payment is usually lower, and dealerships offer a variety of lease incentives.

It can improve your cash flow or allow you to drive a vehicle you couldn’t otherwise afford. Other advantages: The vehicle is usually covered by the manufacturer’s warranty for the duration of the lease, you save money on sales tax and you don’t have to worry about selling the vehicle when it gets old.

But do the math, Gillis said, and you’ll see that leasing typically costs more than paying off a new car loan. And that’s because you’re paying for the rapid and significant depreciation that occurs when a new car rolls off the lot.

“I still recommend buying the car over leasing it – and especially now because leasing prices have gone up and residual values ​​are now rising to reflect the current market for overheated used cars,” he said. said Gillis. “So at the end of this lease, if you wanted to buy this vehicle, it’s going to be very expensive.”

There may also be “sticker shock” at the end of the lease if you’ve exceeded your mileage limit, or if there’s more than normal wear and tear. “That’s where it’s going to cost you,” Gillis said.

Consumer Reports compared buying to renting and concluded that, as attractive as a lease may seem, it has a number of drawbacks. This “usually costs you more than an equivalent loan” and if you lease car after car (as many people do) your monthly payment drags on. When you buy a car, the longer you own it after the loan is paid off, the more value you get from it.

CR’s advice: “In the long run, the cheapest way to drive is to buy a car and keep it until it’s no longer worth repairing.”

If you’re looking for a new car, but don’t need it right away, you might get a better price if you can wait until next year. It may take manufacturers just as long to deal with current production issues.

About Consumer Checkbook and CarBargains

Puget Sound Consumer Checkbook and checkbook.org are a non-profit organization whose mission is to educate and help consumers. Checkbook also rates local service providers – home improvement contractors, doctors, dentists, vets, stores and more. It is consumer backed and does not take any money from the companies it reviews. BECU members can try Consumers’ Checkbook for free for 30 days and get 50% off their annual subscription.

For more than 25 years, Consumers’ Checkbook has offered its CarBargains service to consumers who want experts to collect prices for them. CarBargains has helped over 100,000 car buyers and guarantees they will get the best possible price.

Portrait of Hervé Weisbaum


Weisbaum Grass

(He, Him, His)

Collaborating editor of the consumer checkbook

One of America’s top consumer reporters, Herb’s has covered the consumer beat for 40 years, reporting for “CBS News,” “NBC News” and the “TODAY” show. His investigative reporting has been honored with five Emmys.

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