Ty Wright | Bloomberg | Getty Images
If you’re reaching the end of your automobile lease, don’t automatically assume that another one is the best option for you this time.
The epidemic has thrown the car industry into disarray, despite the fact that many people lease from lease to lease, which puts them in a new vehicle every few years. According to experts, this typically indicates that the calculation for determining whether or not another lease makes sense has shifted.
In the first place, “there isn’t an easy way to obtain access to the automobile you want immediately,” according to Pat Ryan, the creator and CEO of the car-shopping app CoPilot. “It’s possible that you’ll have to wait three to six months for it.”
More from the Personal Finance section:
Here is an example of how rising inflation might result in greater tax obligations.
Are four-day workweeks the answer to the problem of employee burnout?
How to shop early on Black Friday in order to obtain the greatest discounts
Following a global scarcity of microchips, which are critical to the operation of modern automobiles, that began last year and continues today, the production of new cars is being held back, leading to an increase in demand that outpaces supply.
According to an estimate from J.D. Power and LMC Automotive, the average amount of time a new car spends on a dealer lot before being sold is 26 days. It was 62 days two years ago, just before the virus ravaged the country. A total of 54 percent of automobiles were sold within 10 days of their arrival at dealerships in October, according to estimates.
In response to this supply imbalance, the average price of a new car has increased to around $44,000, according to a projection by J.D. Power and LMC. That is a 19.3 percent increase over the average transaction price of $36,887 recorded in October 2020.
The fact that manufacturers have reduced their incentives since, in general, they do not need to give significant discounts to sell automobiles at the current time is a contributing factor to record transaction prices in part.
Demand from consumers has also spilled over into the used-car market, driving up the value of used vehicles as well. In the United States, the average retail price for automobiles between one and three years old is $38,974, a 46 percent increase from $26,627 two years ago, according to CoPilot.
The good news for lessees is that their present vehicle may be worth more than they anticipated — giving them the opportunity to profit from the difference in value. CoPilot provides a tool to its members that assists them in determining the value.
You’re sitting on a profit, but if you turn it in, you’re handing over that profit to the dealership.
Pat Ryan is a well-known actor and singer who has been in several films.
CoPilot was founded by and is led by its CEO.
As a result, you may be able to purchase the vehicle outright for less than the amount you would pay for the vehicle if it were lying on a dealer’s lot right now. This is due to the fact that the residual value — the amount of money the car will be worth at the conclusion of the lease — was determined when you signed the lease several years ago.
“You made a payment for depreciation that did not occur,” Ryan explained. In other words, “you’re sitting on a profit, but if you turn it in, you’re handing over that profit to the dealer.”
Additionally, the bells and whistles you are accustomed to in your current vehicle may not be there in the next one, according to him. Several functions, such as driver assistance and monitoring systems, as well as blind-spot monitoring, have been temporarily discontinued by some automakers as a result of the chip shortage.
“It’s possible that you won’t get any new amenities on your next automobile, or even the features that you presently have,” Ryan said.
According to him, with automobile prices at all-time highs, the next lease would be adjusted to reflect the increasing values..
Rather than waiting for prices to normalize, Ryan advises his members to “buy out and keep an eye out.” He also believes that as inventories return to normal levels, prices would ultimately stabilize as well.