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The Nitty Gritty

To Buy or Not to Buy: That is the End-of-Lease Question

Are you nearing the end of your car lease? You may have planned to turn in the keys and wave goodbye to your car—but not so fast. Today’s car market offers compelling reasons to consider buying out your lease to take ownership of the car: lack of inventory and the opportunity to put some money back in your pocket.

This market is unlike anything we’ve seen before. Visit any dealership right now and you’ll see that new vehicles are in short supply and prices for used cars are going through the roof due to increased demand. COVID-related supply chain issues and a global computer chip shortage have emptied dealership lots as buyers pay for cars that won’t even arrive for months.

In most cases, leasing companies are required to allow you to buy out your lease. The price is based on the car’s residual value—more on that later—and was set at the beginning of your contract. Let’s take a closer look at two scenarios where buying out your lease makes the most sense.

1. Skip the frustrating shopping experience and inflated prices

Shopping for new and used cars is especially challenging now that dealerships have less incentive to negotiate or offer sales. Leasing prices are also inflated due to higher market values.

By buying out the lease on a car you enjoy, you can skip the hassle of shopping for a new one when inventory is so frustratingly low. Additionally, your buyout amount was determined at the beginning of your lease, which was likely before the current shortage increased market values. This means that it could be lower than what you’d pay for another car now.

Another thing to consider is that because current asking prices often exceed the MSRPs, you risk overpaying for a new car. Even worse than that big monthly payment, you could end up upside down on your auto loan as the market corrects.

“If you owe $23,000 on a car that’s actually worth $16,000 and it’s not the car you want, you’re stuck in that car,” Ardent Auto Buying Concierge Pete Kuryluk says. “If you have an accident or that car is stolen, insurance companies tend to pay out based on the market value and not what you owe, so even Gap insurance might not be enough to cover the difference.”

2. Sell the car for potential profit

Ardent Auto Buying Concierge Steve Roberts sees huge demand right now for one-to-three-year-old, low-mileage cars. The values on those vehicles have increased by 40% since the pandemic. In other words, you could have significant equity in your vehicle—if you owned it. In this case, you may want to buy out the lease and then sell the car for its higher market value.

“Everyone should be looking at those values and seeing where they are. Otherwise, you could be leaving money on the table,” Steve says. “We haven’t seen a lease that’s not in the green since these conditions began.”

How much longer will this market last? Inventory is still restricted, but Ardent’s concierges see signs the car market could start returning to normal before the end of 2022.

“Like a big ship, it’s taking a long time for the market to make a full 180-degree turn,” Steve says. “Inventory is being gobbled up as soon as its produced due to pent-up energy in the marketplace. Many people are driving a car they stopped liking two years ago.”

Getting Started with your lease buyout

Before contacting your lease provider, consider asking Ardent’s Auto Buying Concierges to discuss your options.

“The free concierge service is unique to Ardent,” Pete says. “Steve and I came from the auto sales industry and used to write leases, so we know what we’re looking at. We can help you determine the value of your car, compare it to the buyout number and explore financing.”

At a minimum, here’s how to determine whether a lease buyout makes sense for you:

  • Review your lease terms and check the buyout amount. Check your lease for a buyout clause. The buyout amount was set when the lease began and reflects the residual value of the car. Factors such as the car’s reliability, resale value, gas prices and industry advancements, among other factors, help determine the residual value.
  • Compare residual value vs. market value. Use Kelly Blue Book or consult with an expert to check the car’s current market value vs. its residual value.
  • Add up any fees. Is there a lease term fee? Does the car need repairs? Did you incur any excess mileage fees? These could all add to the total cost to buy out your lease or to turn the car in.
  • Assess your financing options. If you need to finance the buyout, what will your monthly payment be? Run the numbers with Ardent’s lease buyout financing, which offers the same competitive rates for new and used cars with flexible term options and same day approvals in most cases.

Conclusion

Given the state of the car market, buying out your lease could help you avoid the hassle of hunting for a car or overpaying. You could also take advantage of a below-market buyout amount and sell the car for profit. Before turning in those keys, reach out to an Ardent Auto Buying Concierge to help you weigh your options based on your individual circumstances.

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