Is now a good time to lease a car?

There are many factors at play when deciding between buying or leasing new, buying used, or buying out your current lease.  According to various industry resources, such as Schuster and AutoForeCast Solutions, vehicle production is expected to be slashed by as many as 800,000 units during the 2022 calendar year. Mitigating circumstances such as supply chain issues due to the lingering effects of Covid-19, the ongoing export embargoes pinching parts supplies made by Russian factories, worldwide microchip shortages, and now rising interest rates to combat inflation here in the US and you as a consumer in the worse case scenario.

The War and Its Ripple Effect on Auto Production

Russia’s invasion has led to a myriad of issues for the auto industry. European manufacturers are forced to completely shut down factory production lines that rely on Russian made auto parts, while Ukraine is one of the worldwide leaders in neon production, a necessary component in building advanced microchips and processors, which is further tightening  an already depleted supply of microchips worldwide. Apart from these immediate effects, the auto market will also sustain long-term pain due to sanctions from across the globe on Russian industries and a potential backlash should the automakers opt to continue auto production amidst the crisis. What that means for you is that the number of vehicles on your local dealer lots will continue to decline at a faster pace as we enter the peak selling season where 81% of all auto leases come due on a yearly basis.

So what are your options in the car market right now?

In this volatile car market, make sure you’re educated on your options and any pitfalls no matter which direction you choose to go. The way we see it; you have 3 possibilities which we’ve outlined below.

    1. If you are currently leasing a vehicle, you can choose to buy your lease out for the residual value determined on your lease contract. This option sounds good in theory, but the reality of the matter is you’ll be forced to pay a much higher interest rate on your now “used” vehicle (at the time of this publication, used auto rates averaged at about 5%). In order to make the payments affordable, you will have to extend your loan term out to 72 months or 6 years. If you drive the industry average of 13,000 miles per year, maintenance like new brakes and tires will need to be factored in as they are due (on average, four new tires cost $1700 dollars installed and brakes will range anywhere from $400-$900 installed).  Your vehicle may also be out of Factory Warranty, typically 3 years or 36 months from the In Service Date, or the date you bought your new car, so plan on buying an Extended Service Contract to cover you from potentially costly repairs on your complex and computer controlled vehicle. ESC’s typically cost 5-7% of your vehicle’s original MSRP, factor in another $3,000 to your payment calculations. Lastly, parts availability, should something fail, is going to keep your vehicle out of service longer, ensure your ESC has rental reimbursement coverage should you go this route.

    2. If you choose to buy a new vehicle and finance it, you will find Manufacturer incentives to be almost non-existent, dealership adjusted market value charges over the MRSP to be exorbitant, and no incentivized interest rates.  According to Kelley Blue Book, the average MSRP of a new vehicle in the US is $47,077, putting new car financing terms out of reach for most American families.

    3. Leasing currently represents the most economical way to drive a new vehicle and pay for it.  Leases can be customized from 18 months to 60 months, with monthly mileage limits as low at 7,500 per year to as much as 25,000 per year.  There are affordable waivers that you can purchase up front to mitigate costs associated with vehicle damage that do not affect your auto insurance premiums.  Low, or No Down Payment options are available.  Money Factors on leases are typically less than finance rates offered by banks.

Luckily, CarJoy is here to assist and inform you of your options in an honest and ethical way. With 60 years of combined experience working with Jeep, Dodge, Nissan and Ford just to name a few, we have deep connections with dealerships in Mineola, Massapequa, Merrick, East Meadow and all across Long Island so you can feel confident that CarJoy will be your trusted partner to put the Joy back into purchasing or leasing a new vehicle.