Rent a car ? Here is why you can get a good deal if you buy.
For drivers with rental contracts, the difference between the projected price and the current market price can be significant. Automotive research site iSeeCars recently compared current prices for three-year-old cars and estimated cash values for new models leased in 2018 and found that an average car can be worth 36% more than the estimated value at the start of the year. lease.
The gap may be even larger for some models. The current market value of a Volkswagen Tiguan, for example, could be $ 9,800 higher than expected three years ago, an increase of 69%. Even a subcompact, the Nissan Versa, has increased in value by more than $ 4,300, or more than 50%, according to iSeeCars. The analysis was based on a database of approximately 10 million new and used car listings.
So if you love your car and it is in good condition, it may be a good idea to buy it at the end of the lease. “You should very carefully consider purchasing the car instead of returning it,” said Karl Brauer, executive analyst at iSeeCars.
Consumers are increasingly doing just that. Daniel Berce, managing director of GM Financial, the financial services arm of General Motors, told an investor conference in August that in the second quarter of this year, 89% of leasing customers purchased their vehicles from the end of their lease, up from around 20 percent a few years ago.
You can also buy the car and sell it yourself, pocketing the profit. But you might owe the sales tax, and there’s another problem: if you need another car, you might not easily find the one you like at a price you consider reasonable.
An alternative may be to use your lease’s “equity” – the difference between the current market value and the buy-out price – to reduce the cost of leasing a new car, Drury of Edmunds said. In effect, you sell your rental to a dealer, who credits the amount of your new vehicle rental.
Jeff Perlman, independent public relations consultant in Los Angeles, said he prefers to drive new cars and is able to apply the equity on his lease of a 2019 Genesis G70, a luxury sport sedan. , on a lease of a more expensive and redesigned 2022 version. of the car. He didn’t have to pay any money, he said, and only pays $ 38 more per month. “I am more than happy,” he said.