Is your car rental expiring? Here’s how to take advantage of high trade values and make a profit on the trade
A shortage of newer model used vehicles is pushing used vehicle prices up to levels never seen before. New vehicle inventories are down about 36% from a year ago, according to Edmunds.com. This is the result of pent-up consumer demand, baffled by factory closures caused by a pandemic last year and the current shortage of microprocessor chips that halted or slowed production this spring.
Limited stocks of new vehicles and high transaction prices are forcing an increasing number of car buyers – even rental fleets – to enter the used vehicle market. And you know what happens when demand outweighs supply. According to Kelley Blue Book, used car prices have increased by 18% on average over the past year.
And yet, current market forces make this a great time to cash in if you are leasing a car, truck, or SUV and the contract is about to expire. This is because car rental contracts usually include a provision that allows a lessee to purchase the vehicle at the end of the term for a predefined “buy-back price”, which is generally equal to or close to the expected residual value at the time. the drafting of the contract. Of course, no one could have predicted two or three years ago that a pandemic of epic proportions would spark a series of events that would push used vehicle values through the proverbial roof.
Edmunds says used pickup trucks in the 2018 model year are worth up to 80% of their original value on average, with sports cars at 64-65% and midsize SUVs at 61%. In an otherwise “normal” market, the average vehicle retains less than half of its MSRP after three years on the road. We note the website’s list of the 20 vehicles in the 2018 model year that are expected to have the highest retained values below.
If you are leasing a vehicle that is nearing the end of your term, it is your responsibility to do your research to see how the buy-back price compares to the current market value of the vehicle. Check online rating sources, enter make, model, trim level, options, mileage and condition. If the value of the vehicle is greater than the buyback, which is almost a certainty these days, you can gain the advantage of the transaction by choosing to invoke this clause. The easiest way is to shop around and find a dealership who is willing to purchase the leased vehicle at the price listed, receiving you any money in excess of the buyback amount. If you have enough cash or can receive temporary financing, you can also buy it from the leasing company and sell the car to a private party, perhaps for more money.
You can start by purchasing the vehicle from the used car departments of local dealerships, or you can request reviews from chains like CarMax and Carvana or online sources. However, you will have to follow the terms of the lease to the proverbial letter. Some contracts may allow you to sell a leased vehicle before the contract expires, while others may impose limits on buybacks. Determine in advance if you are required to return the car only to a franchise dealership that sells the same brand, or if you are free to sell or trade it in to a dealership or private buyer.
Make sure you receive all offers in writing with a date specified for their validity period to ensure that a given offer will not be withdrawn when you show up with the keys in hand. Since resale values usually vary by location, given regional supply and demand issues, you might want to spend a day or two buying the car for deals outside your area. immediate to try to get a better deal.
It is also a good time to sell or trade in a car that you finance or that you outright own. “If you were upside down on your car loan a few months ago, there’s a good chance you’re in the dark today,” says Ivan Drury, senior director of insights at Edmunds. “Consumers who own a vehicle and plan to buy a new car in the near future should consider pulling the trigger now. The inventory situation won’t improve anytime soon, and you could essentially wipe several cars. . payments with the added value of your trade. “
You’re sure to win – even if you owe more money than the vehicle was worth a few months ago – if you drive any of the 20 models of 2018, Edmunds experts say they’re currently enjoying of the highest values retained:
- Ford F-250 Super Duty pickup: 80%
- GMC Sierra 2500 HD pickup: 80%
- Ford F-350 Super Duty pickup: 80%
- Toyota tacoma pickup: 79%
- Ram 3500 pickup: 79%
- Toyota tundra pickup: 78%
- Toyota 4Runner SUV: 77%
- Chevrolet Silverado 2500 HD pickup: 76%
- Jeep Wrangler JK SUV: 75%
- Aries 2500 pickup 74%
- Jeep Wrangler JL SUV: 73%
- Nissan frontier pickup: 72%
- Chevrolet Colorado pickup: 71%
- Honda ridgeline pickup: 70%
- Dodge charger sedan 69%
- Subaru Crosstrek SUV: 68%
- GMC Canyon pickup: 68%
- Land Rover Range Rover Sport SUV: 68%
- Honda CR-V SUV: 67%
- Ford F-150 pickup: 66%