No two drivers are the same, and that reality is evident when motorists look for a new vehicle. Some drivers may want a flashy sports car, while others hope to get a great deal on a spacious minivan. Drivers also may be looking for different types of deals when visiting a dealership.
Leasing was once a gateway to a new car for millions of drivers. However, the automotive experts at Edmunds note that leases made up 18 percent of transactions involving new vehicles in the middle of 2022. That figure represented a 27 percent decline from a year earlier. That decline could be a byproduct of several variables, including the value of trade-ins. Edmunds notes that the average trade-in value of cars leased in 2020 is 19 percent higher than the predetermined residual value, which means it makes sense for some motorists to purchase their vehicles at the end of a lease rather than turn it in.
Despite the decline in leases, the option to lease can still make sense for some drivers. With that in mind, individuals who are considering leasing can consider these factors to ensure they make the best decision possible.
· Trade-in value: As noted above, the value of trade-ins is very high. However, that value could be vulnerable to considerable fluctuations. The spike in average trade-in values was related to supply-and-demand issues associated with the COVID-19 pandemic. Some of those issues have lingered, which means the supply of new vehicles is still lagging with some manufacturers. With fewer new vehicles to sell, the value of vehicles coming off a lease could be much higher than the predetermined price lessees would pay to purchase the vehicle outright when their lease expires. Drivers may still prefer leasing to purchasing, but in the current economic climate, it makes sense to determine the market value of a trade-in when their lease is set to expire.
· Budget: Millions of motorists prefer leasing because monthly lease payments on new vehicles tend to be significantly less than it would cost them to purchase the vehicle and finance it through a bank or credit union. And that still holds true, as data from Experian indicates the average monthly payment for a financed vehicle is $667, which is $127 more than the average monthly cost of leasing a car or truck. That’s a considerable cost benefit of leasing, particularly at a time when high inflation has forced millions of households to cut back.
· Maintenance: Another factor to consider before leasing a vehicle is maintenance. Lessees are responsible for maintaining the vehicle during the lease terms, but new vehicles do not typically require the level of upkeep that older vehicles need. Drivers who are considering purchasing a leased vehicle when the lease expires should factor in the costs to maintain the vehicle in the years ahead, particularly if the manufacturer’s warranty is due to expire soon. Substantial maintenance costs could compromise drivers’ budgets, and that’s unlikely to happen if drivers turn in a leased car and begin a new lease.
Auto leases have declined by a considerable margin in recent years. However, such arrangements may still make sense for some drivers.