Need a car? Here are the options for hitting the road.
It’s not just the Canada geese who are logging some serious miles with the return of good weather, we are too! For some people, the desire for a car is always in season, no matter what the circumstances. The pandemic has impacted every aspect of our lives, driving up gas, supply and material costs, and increasing prices in the auto industry. With all things considered, is leasing a smarter solution, or is it better to buy? Here are a few things to think on when making the decision that’s right for you.
A new reality …
The automotive market took a major hit during the pandemic and the consequences are even felt in the price of used vehicles. Since manufacturers are currently having difficulty obtaining components, including the all-essential electronic chips, we are expecting a shortage on new vehicles that could stretch right until the end of 2022, or even further! While experts are assuring us that the situation will eventually return to normal, it could take longer than we would like.
Lease or buy?
Now, that's THE question! Lockdowns and working from home have dominated our lives for more than two years, which led to a marked decrease in mobility. With all that has happened, you may wonder if the purchase of a vehicle is still relevant today. Maybe leasing would be a smarter option. Here are a few things to consider:
Have you considered demos?
If you’ve passed by car dealerships that are lined up one after the other (and seem largely the same!), you will have no doubt noticed an uncomfortable detail: the majority of the car lots are empty! Don’t hold your breath if you’re planning on buying a new car. Waiting periods of a few months (and even up to a few years for certain models!) means you’ve got to have plenty of patience.
Here’s an idea: what about purchasing a demo model? This type of car is the perfect two-in-one: it offers the advantages of both new AND used vehicles. A demo is already considered “used,” since it is registered as sold. This is an absolute deal because most demos have generally clocked less than 10,000 km! And as a bonus, they come with the remaining part of the manufacturer’s warranty. This usually lasts much longer than for the same vehicle in used condition. Something worth considering, right?
Residual value: a key factor
Currently, the residual value (an estimate of the resale price of a leased car) has not been readjusted according to the market price. Here’s an example. A four-year car lease is about to come to an end. If the lessor buys the car and resells it, they will make more money than if they receive the amount offered by the dealership. This is because the vehicle’s residual value calculation has not been improved.
Think about it this way: in the current context, it is preferable for those who lease a car to buy it and resell it because used cars are rare and have gained a lot in value. It is not uncommon to see discrepancies of $2,000 to $6,000 from the residual value listed in the lease. You’ll be able to pocket a profit instead of giving it to the dealer!
Used vehicles: a booming market
Commercial auctions are also heating up! Since vehicles are as rare as four-leaf clovers, the prices of used vehicles have been driven to unprecedented levels. The weakness of our dollar has also caused Americans to do a little cross-border shopping, further increasing the shortage and driving up prices even higher. Again, patience is key. If you get your hands on that coveted car, you should expect a delay of at least a few months before you can actually drive it.
If all this information hasn’t helped in your decision, don’t forget about the alternatives: public transit, carpooling, car sharing, intermodality and active transportation (cycling, scooter, walking, etc.) are all great way to get around safely while waiting for the auto industry to find its bearings.