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Do you drive a rented vehicle? Here’s why you should buy it

Do you drive a rented vehicle?  Here's why you should buy it

Edmunds data shows that drivers who lease their vehicle would benefit from buying the car when the lease is over, or even sooner.

The unexpectedly large rise in used vehicle prices over the past two years, caused in part by the shortage of new vehicles, is impacting the market for leased vehicles – and those who currently lease the vehicle they drive would probably benefit from buying it when the lease is in place, or sooner.

According to data from Edmunds, the difference between the trade-in value of a leased vehicle in 2019 and the residual value of that vehicle averages 33%. Residual value is what is assigned to a vehicle at the start of the lease, and is the predetermined price for what the person leasing the vehicle can buy it at the end of the lease, usually three years.



“The residual is a forecast. Little did they know there would be a global pandemic and new car buyers would have to resort to buying from the used car market,” said Ivan Drury, chief information officer at Edmunds. “So because of that, their expectations of a vehicle’s value got a little off.”

One option is to buy the vehicle at its salvage value, continue driving it knowing it’s a good deal, and avoid the hassle of trying to buy another vehicle in today’s market.

Another option is to take advantage of it, which would not be difficult.

“Buy the vehicle and then sell it, either to an online retailer, or to a place like CarMax, or to a dealership, someone who will want to buy that vehicle from you. And right now, with used vehicles being so hot, there’s going to be a lot of people wanting their cars,” Drury said.

A third option is to use the value of the vehicle as leverage when trading for another vehicle.

Drury said unless the vehicle has exorbitant miles or excessive wear, just about anyone currently driving a two- or three-year-old leased vehicle is guaranteed to see an increase in value.

One caveat to factor into Edmunds’ calculations: to buy the vehicle at the end of the lease, you either have to pay the full amount in cash—say, write a check for $30,000—or finance the purchase. But even with a typical down payment on a car loan, most lenders would still be winners.

The Ford Mustang produces the highest percentage increase, generating an average of 68% more than its original estimated residual value of nearly $12,000.

Among luxury vehicles, a leased 2019 Lexus IS300 has the largest percentage difference between residual and trade-in, at 46%, or nearly $10,000.

Edmunds has a free online instant valuation tool to see the current value of vehicles.

Here are the 10 2019 luxury vehicles with the biggest difference between trade-in value and residual value:

Luxury leased vehicles with the highest percentage increases in trade-in value over original residual value. (Courtesy of Edmunds)

Here are the top 10 mainstream vehicles of 2019 with the biggest difference between trade-in value and residual value:

Leased consumer vehicles with the highest percentage increases in trade-in value over original residual value. (Courtesy of Edmunds)

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