Vehicle shortages mean your end-of-lease car could be worth more than you think
Those who lease vehicles and have terms coming to an end may be considering handing in the keys at the dealership and walking away, but now, car shortages and a demand for microchips has seen end-of-lease vehicles worth a lot more than one may think.
When the auto industry was drawing up leasing contracts three or four years ago, no one could’ve expected that a pandemic would create a vehicle shortage.
Now, as dealers scramble to find used cars, leased vehicles are worth a lot more.
Four years ago, Christine Denty of Brooklin, Ont. decided to lease a 2018 BMW 440i xDrive Gran Coupe. Denty’s lease recently came to an end and she was surprised to hear that, if she turned the vehicle back into her dealer, she would have to pay almost $2,000 in wear and tear charges.
"I would be paying BMW to take my car, but not only do they get my car, they would be turning around and selling it. So they would get two grand from me and sell the car for even more," Denty told CTV News Toronto on Wednesday.
Instead, Denty decided to use an auto broker to sell the car and she was able to pocket about $3,000.
"I will be able to turn a profit on my vehicle," she said.
Viraf Baliwalla is President of the Automall Network, an auto broker with a dealer's licence that helps customers buy and sell cars for a fee.
"Clients hire us to help with buying vehicles as well as selling vehicles," Baliwalla said.
Baliwalla said drivers that have leases coming to an end at this time should know that their vehicle may be worth more than they thought.
“COVID-19 has created this weird situation where there is a pent up demand, so vehicles today are actually worth far more than they were two years ago," he said.
Baliwalla said one of his clients had a 2017 Honda CRV AWD LX with 37,900 kilometres. When the lease ended, there was a buy-back end-of-lease price of $13,805, but another dealer anxious to find vehicles to sell agreed to pay $18,805 for it.
The client walked away with a profit of $5,000.
“Prices have gone up, so now you have the right to buy out that vehicle if you wish or someone else is willing to buy it out for a lot more because the market has gone up tremendously," Balliwalla said.
Leasing contracts vary, but Denty said what’s important is that anyone with a lease ending soon should know they have options.
"They can get the profit from their car instead of the dealership they are returning it to, which will have every intention to sell it for more, because the car is worth more than it was before" she said.
The current situation with leased vehicles may not be like this for long — possibly the next six months, or when dealer inventories return to normal.
Still, if you have a lease ending soon, it may be worth it to do the math and explore your options.