Car lease ending soon? Another one may not be your best option

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  • Inventory at dealer lots is limited amid global chip shortage.
  • The average time a new vehicle sits on a dealer lot before it is sold is 26 days, compared to 62 days before the pandemic hit.
  • Your car may be worth more than you estimated at the beginning of your lease when the residual value was pre-determined.

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If you’re nearing the end of your car lease, don’t assume that another is your best option this time around.

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While many consumers move from lease to lease — which puts them in a new vehicle every few years — the pandemic has hit the auto industry. Experts say this generally means whether the calculus has changed.

For starters, “you don’t have the ability to quickly access the car you want,” said Pat Ryan, founder and CEO of the car-shopping app. copilot, “You’ll be waiting three to six months for this.”

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On-going global shortages of microchips — key components needed to operate today’s autos — that began last year are hampering manufacturers’ production of new vehicles, which has translated into supply-demand.

According to forecasts from JD Power and LMC Automotive, the average time a new vehicle sits on a dealer lot before it is sold is 26 days. Two years ago – before the pandemic hit – it was 62 days. An estimated 54% of vehicles were sold within 10 days of their arrival at dealerships in October.

As forecast by JD Power/LMC, the supply imbalance has pushed the average amount paid for a new vehicle to about $44,000. This is 19.3% higher than in October 2020, when the trading average was $36,887.

One reason for record transaction prices is that manufacturers have reduced their incentives because, in general, they don’t need to offer large discounts to sell cars right now.

Consumer demand has also spread to the used car market, driving up prices there as well. According to CoPilot, for vehicles 1 to 3 years old, the average retail price is $38,974, up 46% from $26,627 two years ago.

The good news for lessors is that your current car may be worth more than you anticipated — and gives you a chance to capitalize on the difference.

You are sitting on profit, but if you turn it, you are passing that profit to the dealer.
Pat Ryan
CoPilot. Founder and CEO of

In other words, if you are sitting on the dealer’s lot for the car now, you can buy your lease for less than what you would pay for the car. This is because residual value — the value of the vehicle at the end of the lease — was established when you signed the lease several years ago.

“You paid for the depreciation that didn’t happen,” Ryan said. “You’re sitting on profit, but if you turn it, you’re passing that profit to the dealer.”

Additionally, the bells and whistles you do on your current car may not be on the next car, he said. Due to the lack of a chip, some features – such as driver assistance and monitoring systems, or blind-spot monitoring – have been suspended by some automakers.

“You might not get the new features on the next car or even the features you currently have,” Ryan said.

And, with car prices at record highs, the next lease will reflect those increased prices, he said.

“What we’re telling our members to do is buy and keep track,” Ryan said, adding that when inventory eventually returns to normal levels, you can generally expect to see prices return to normal.

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