Risk adverse individuals who have higher disposable income pay a premium for a 3 or 5 year lease on a new vehicle. While there are many benefits to leasing, unless you plan to buy brand new every 3 or 5 years, leasing is never the best financial choice. This article discusses why these off-lease cars are such good deals and how to find them.
To quickly summarize how a lease works, an individual pays monthly for a vehicle based on the decided invoiced value. Terms are for 3 or 5 years, when the lease expires the participant is offered the option to buyout the vehicle at the price agreed to at lease signing.
Buying Off-Lease Is Usually A Great Deal
Individuals who drive leased cars are effectively renting them for 3 or 5 years. They are obligated to ensure that the vehicle remains in premium shape otherwise on lease closure, they will pay out of pocket for damages above wear and tear. In most cases, cars off lease remain in great condition because the previous owner has an obligation to keep the car in decent condition.
Depreciation is the biggest price you really pay on a vehicle. Yes, you may have spent the purchase price of the car to own it, but the real cost of ownership is the depreciation during your time of ownership. Up to 40-50% of the price of the car will be depreciated on a brand new car in the first 3 to 5 years.
Leases always have a clause to limit overall kilometers driven. As the individual looking to acquire a lease buyout, all the cars you will be looking at will have a very low odometer (kilometer driven) count, which means you will be buying great value.
Off lease cars are also usually the newest used cars you can find. Very rarely do you find people selling their car before 3-5 years because it means they must have purchase the car outright in cash and want to dispose of it. This may just be change of heart or circumstances, but such an early sale may be a warning sign. Cars that are available before 3 years should be purchased with careful scrutiny due to the high purchase price.
With careful research, we find that a lease buyout (method 3) is the best way to maximize value if you are looking for a newer used car.
How To Buy Off-Lease Cars
Method 1 – Private Sale
The only cases where an individual is able to sell an off-lease car is just after they buyout their lease. They may have a change of heart after buying out the lease, or trying to make a profit from selling the car in the used car market. Both these cases are relatively rare. Additionally, not everyone will advertise the car as an off-lease car.
Method 2 – Used Car Dealer
The majority of leased cars after expiry are sold to used car dealers. These cars usually represent the higher end vehicles for most dealerships, as they are usually the newest and they would immediately mark up their buyout price for customers. If you prefer buying from a dealer, ensuring a car is off-lease before buying means that you still capture some of the value from buying a leased car, but may pay a slightly higher premium.
Method 3 – Lease Buyout
The strategy here is to take over a lease that is about to expire and get the lease buyout option as well. The goal is to snatch up the vehicles before they are sold to used car dealers who would charge you more. The result is a newer used car at a very competitive market price and the likely premium condition of the vehicle.
Each person is offered a different monthly rate and buyout price, because of this you will need to research what price you would expect to pay for the used car in Method 1 and Method 2 and then compare that to the price of the buyout plus remaining months on the lease. Keep in mind that there will also be a lease transfer tax.
We use LeaseBusters as the website of choice to look for expiring leases. There are many people on this site paying up to thousands to incentivize someone to take over their lease due to their change of life circumstances. This presents even more ways to save money and extract maximum value when looking for the best deal.
If you do your research carefully, you will find that the price you would expect to pay with this strategy will be similar to private sale and significantly cheaper than used car dealerships. We consider this method the best way to buy a newer used car by snapping up the vehicles before it hits the dealer lots.