With the recent surge in used car prices in the U.S., many people leasing vehicles have discovered the surprising fact that the market value of their automobiles is greater than the dealer’s quoted residual (buyout) price.
All a would-be lessee needs to do is buy the car from the dealer and sell it on privately. The dealer gets the residual amount and the former lessee pockets a tidy sum.
Take the example of a 2008 Volvo XC90. With more than twelve months left on the lease, the dealer’s buyout price was a quoted US$18,500. Compare this to the amount the lessee was likely to get by selling the car privately: a far more substantial US$27,000. That’s a profit of US$8,500!
Paul Taylor, chief economist for the National Automobile Dealers Association (NADA) describes the situation thusly:
“What’s likely to happen now is [dealers have] underestimated the value of the car. So the residual price is low, and [lessees] have more incentive to purchase it. Or, buy it and then sell it.”
It’s all thanks to the undersupplied, overinflated used car market in the U.S. at the present time. Add to that the fact many lease contracts are agreed on months or even years in advance, there’s nothing the lessees can do about it.
And owners are taking notice. 21.8% of lessees now buy their cars, up from a historical average of 16.4%. Additionally, 40% of those who do buy their cars resell their cars within six months, up from 27.3%. We are living in interesting times, indeed.
By Tristan Hankins
Via: NY Times
