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If your three-year car lease is about to expire soon, know that your car could be worth a lot more than you realize.
The average trade-in value for 2022 for 2019 model year vehicles is 33% ($7,208) above the predetermined residual value — the value of the vehicle at the end of the lease — according to research from Edmunds.com. This means that you may be able to make a profit on the car that you would normally send to the dealership.
“These values are very different from what the residual value estimates were,” said Evan Drury, Edmunds’ senior director of insights. “That’s a good thing for anyone doing a rental.”
An ongoing global shortage of microchips – key components needed to power cars today – continues to hamper production of new car manufacturers, which has translated into increased supply demand. The Russo-Ukrainian War Can Also Increasing disruption to the manufacturing supply chain It leads to further reductions in production.
Demand continues to trickle into the used-car market, with prices up 41.2% from a year ago, according to the latest data from the Bureau of Labor Statistics. The average price for cars 1 to 3 years old is more than $41,000, up more than 50% from $27,300 in January 2020 (pre-pandemic), according to the car shopping app. copilot.
Among the luxury cars, the 2019 Lexus IS 300 tops the list with the biggest jump between its current swap value and the residual value that was allocated to it at the start of the lease. The average car price is now $31,521 when traded, 46% higher than the estimated residual value of $21,653, according to Edmunds.
For mainstream vehicles, the Ford Mustang has the biggest gain: Its average trade-in value is $29,215, 68% higher than its residual value of $17363.
These unexpectedly high values mean that you may have options when your lease expires to take advantage of those positive equity.
For starters, though, it may be wise to consider buying the lease when it expires, because you’ll get the car for much less than you would if you were to buy it from a dealer.
“If you don’t want to deal with fighting for inventory or pay more [sticker price] To buy a new car, look at the acquisition, Drury said. It can be much cheaper than going out and getting another car.
If you’re interested in seeing if you can take advantage of any equity in the car – either as a trade-in or as cash – start by finding the value of your car. You can do this on sites like Carfax.com or Edmunds. The retail price in general will be a few thousand dollars more than you would get by trading it or selling it to an agency, Drury said.
You should also specify the acquisition amount, which is generally the same as the residual value if you wait until the lease ends (this information is on your contract). You may be able to buy it early, although there may be a fee to do so. You can also buy the lease and then turn around and sell the car for more on the open market.
In addition, check if your financing company allows you to sell the car to any dealer you want (the so-called third-party acquisition).
Some automakers have restricted this practice You are required to return the vehicle to a dealership of that brand (for example, return a Honda vehicle to a Honda dealer).
Drury said that if you are allowed to sell the car elsewhere, you can shop for used car dealers to see where you can get the most out of. If you can’t make a third party purchase, try selling the car back to a dealership of the same brand rather than just returning it at the end of the lease.
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