In the market to buy a new car? Before you go out and start shopping for the latest model, you might want to think about a “new-to-you” option.
Car dealerships are about to see a massive influx of lease cars turned in. What does that mean for you? Big savings on low-mileage cars that are only three or four years old.
Leased Cars Are Being Returned
And in 2017, an additional 3.5 million cars are slated for return.
But why the sudden jump in off-lease cars on the market?
After the Great Recession, people were wary of taking out auto loans, so they leased instead. Plus, as new cars have gotten more expensive (new car prices climbed 13 percent in the past 5 years), leases have made cars more affordable to consumers.
It’s Economics 101—more used cars are coming onto the market as their leases end. The increased supply is driving down prices.
Other Factors At Play
But there are some other factors at play here.
When dealerships and lenders design leases, they make an educated guess about how much the car will be worth when it’s returned off-lease. Then, they base the customer’s monthly payments on that estimate.
The trouble is, cars are depreciating faster than expected—the average car depreciated about 23 percent last year, up from the average annual rate of 18 percent.
In other words, the cars that were leased out three or four years ago just aren’t worth as much as dealers and lenders expected. Beyond that, people just aren’t that into sedans anymore—more buyers are looking for trucks and SUVs, which is also pushing down the price of cars.
You Can See Serious Savings
What does this mean for you? All of these used vehicles need to go somewhere. Dealers want them out the door and this means lower prices to get them to sell faster. So, you save money on the bottom line price of a newer vehicle.
How much can you save? Up to half off a new car’s retail price, according to Auto.com.
“I was able to get a higher-end car by buying used than by buying new, with my budget,” Jake Winfield, a Phoenix math teacher, told the Associated Press. He recently bought a 2015 Honda Accord with less than 15,000 miles on it for just under $20,000. Plus, his certified pre-owned car was inspected and comes with a warranty.
Benefits Of Buying An Off-Lease Car
Getting a lower price is just one benefit of buying an off-lease car. Need more convincing? Think about these advantages, according to Auto.com
- Lower mileage: Lease cars come with strict mileage limits that customers cannot exceed. For most lease cars, this means they don’t get past 36,000 in three years. Lower mileage means less wear and tear on the vehicle.
- Inspection: Even with limited miles, the off-lease vehicle must get an inspection from the dealership before it goes back on the sales floor. Any problems the dealership finds must get repaired. In other words, you get a worry-free car.
- Extended Warranty: Certified pre-owned cars typically get an extended warranty of some kind when put back on the sales floor. Also, if the car’s original warranty is still valid, the dealership will honor that, as well as add one an extra year or two to the coverage. Not a bad deal.