Lease Trends Reveal Buyout Surge

Automotive leasing continues to play an important role in fueling the come back of the auto industry as buyers can choose this alternative to traditional financing by “renting” their next car. Over the three decades I’ve owned my own vehicles, I’ve leased just once, but that experience was a positive one. It certainly helped that we returned the car in good condition and with low miles on the odometer, walking away from the car when our lease term came to an end.

Lease Swapping

But not everyone keeps their vehicle to the end of the lease term, choosing to get out from underneath their agreement early. Until recent years canceling a lease was a costly endeavor but due to the rise of leasing services such as LeaseTrader.com, people are much more likely to find someone to take over their payments, freeing themselves from an important financial obligation at a low cost and with no hit to their credit rating.

The folks at LeaseTrader.com are witnessing a growing trend unfold, one involving drivers who are opting to keep their cars once their lease obligation ends. Nearly every lease contract gives lessees the choice of buying out their car at lease end including people who have assumed a contract.

“Drivers can find out a lot about a car when they drive it for eight or 12 months, like how it handles, maintenance schedules and the overall condition,” said Sergio Stiberman, CEO and founder of LeaseTrader.com. “Many people in this situation feel there is low risk involved since they are only committed to the short-term contract to see if they end up falling in love with the car.”

Hot Cars

According to LeaseTrader.com, the majority of customers exercising lease end buyout options are doing so on vehicles like the BMW and 3 Series, Mercedes ML350, Honda Civic, in addition to the Toyota Camry and Corolla. With a lease swap through a service such as LeaseTrader.com, customers are able to lower their car buying costs as there is no down payment requirement present.

In effect, the person who takes over a lease gets to “test drive” a car for many months before deciding whether to keep it or not. If they like the car, they can purchase it at its residual value. If not, they can return the car and look for a new set of wheels.

Despite Recovering Market, Incentives Continue

Now is a great time to buy a new car

Bear with me on this one, but in my opinion right now is a great time to buy a new car. There, I’ve said it.

Last year, particularly in the first quarter, automakers seemed to be giving away their cars by placing thousands of dollars on the hoods of their slow sellers in a bid to move them and reduce their inventories. I remember hearing about Dodge dealers marking down their big Ram trucks by at least $6000 with fully loaded quad cabs slashed by ten grand or more.

Read what the experts have to say when shopping for a new car.

Those days are over, but not the incentives people want. March was a good month for sales in part because rebates and low-rate financing were in abundance, but April will prove to be just as good a month for the reason that April is typically slower than March. Automakers don’t want to break the momentum and believe that pent up demand is fueling at least some of the showroom traffic.

And, with Toyota trying to get back business it lost earlier this year due to recalls and production stoppage, the deals from the world’s largest automaker will continue to be among the best ever offered.

Of course, if you aren’t ready to buy a car, then don’t. Good deals will be offered throughout the year as manufacturers ramp up production and battle for market share. The last thing anyone needs to do whose job outlook is rocky or finances shaky is to commit themselves to buying something they cannot afford. I’m not talking to these consumers, but to those who are ready to buy.

As always, shop around. Obtain price buying reports from Consumer Reports, Edmunds, KBB or similar type service. Know what car you want, the options you require and the price you are willing to pay.

Strongly consider arranging your own financing particularly if have the choice between taking a hefty rebate or opting for low-rate financing. But be warned: you may not be able to match the zero percent financing some companies are currently offering. Sit down with a calculator and run your numbers. Then be prepared to negotiate.

Try not to make your old car part of the deal. Or, negotiate your best price on your new ride and then see what your old car will fetch. This is where car shoppers lose a lot of cash: on what dealers will give them for their trade.

Don’t be pressured into agreeing on anything that doesn’t net you savings—the deals are out there, but you won’t necessarily find them placed in your lap.

Happy car shopping—take your time and you’ll find a new ride for a great price.

See Also — Why Do We Need Gap Insurance?

5 Steps to Buying Your Next Car

Now Is The Time To Buy A New Car

In case you hadn’t realized it yet, we’re currently in the midst of one of the worst downturns the auto industry has seen in decades. Year to date, sales are down by 15%, but that figure is much higher for some automakers, including Chrysler where sales have dropped by more than 25% this year.

Bad news for the auto industry coupled with the calendar year coming to a close means one thing: passenger vehicle discounts have never been better, giving you an excellent chance to buy a new car for a lot less money.

Keep reading and we’ll take a look at five steps to help you save money on your new car:

1. Do Your Own Research – You may be fond of a particular make/model, but does that car live up to its hype? For an objective look at what experts say about the vehicle you like, make sure you acquaint yourself with reviews from The Truth About Cars, Consumer Reports, and other no holds barred publications.

2. Shop Around - Through the end of the year, the deals being offered will include some of the best seen in years, but shop around for the biggest savings. Take a look at what is being offered – low-cost financing, cash back, or a special lease deal – weigh each plan by learning which one is best for you. Also ask about military discounts, new grad rebates, and other offers available on top of already great savings.

3. Arrange Your Own Financing – If you can pay cash for a new car, you’re in the best position when it comes time to negotiate. You’ll determine the final price you pay for your car while reaping the benefits of all of the discounts being offered to you. But, if you’re like the majority of drivers, you cannot afford to pay cash. Instead, you can arrange your own financing before you set foot in a dealer’s showroom. Your rate may not be as low as what Ford Credit or Mitsubishi Motors Credit has to offer, but you can take manufacturer cash discounts instead and still come out ahead.

4. Compare Warranties - These days, all cars offer some sort of warranty on various parts, maintenance, powertrain, etc. The better the coverage offered, the less you’ll have to pay out of pocket down the road should something happen to your car. Consider buying a car that comes with a comprehensive warranty, forgoing the dealer warranty plan that can set you back an additional $500 to $1500 or more.

5. Contact Your Insurer – Before you settle on a particular car, why not call your auto insurer to get a quote on insurance coverage for the coming year? The results may shock you – that little Fit from Honda may cost you more money to insure than the Ford Focus thanks to crash worthiness tests conducted by the Insurance Institute for Highway Safety (IIHS), an industry advocacy group that sees how well cars hold up in a crash.

By doing your own research and taking your time comparing the deals being offered, you stand to save thousands of dollars off of the purchase price of a new car. Great deals won’t be around for a long time and when the market begins to recover, they’ll soon become as rare as hen’s teeth.