The car leases of unemployed Canadians could be one of the best bargains going if you are looking for new wheels.
While the trend is far more pronounced in the United States, Miami-based leasetrader.com says it is seeing more cars coming to the market for trade with far less mileage than allowed under the contract.
Most leases are designed to allow about 20,000 to 24,000 kilometres put on the vehicle with a premium paid at the end of the lease if over. John Sternal, vice-president of marketing with leasetrader.com, said in some luxury brands, mileage is down almost 25% over the past two years.
“There is huge negotiating power if you’ve got more mileage left on your lease,” Mr. Sternal says.
While job loss has not affected lower mileage rates in Canada to the degree it has in the United States, Mr. Sternal says cutbacks in spending likely have. “What we have found in Canada is they are spending less so there is less incentive [to drive].”
What it all means is, if you are selling your leased vehicle — or better yet, buying — lower mileage means more leverage.
Usually, a consumer trying to unload a car has to pay some sort of sweetener to get somebody else to take over the lease payments. Low mileage can lessen the amount of sweetener.
Selling a lease also usually means paying the leasing company some money for costs associated with the transfer, which covers things such as paper shuffling and a credit check.
“Every lease situation is different. Everybody’s credit is different, everybody puts down a different amount. Some people prepay for a lot of miles, some don’t,” Mr. Sternal says.
Jim Davidson, a mortgage broker with carsmart.ca, says he has also noticed the sharp decline in mileage levels but doubts you can make any money getting out of a lease. The deals look better on the other side of the transaction, he says.
“People can pick up a car, assume the payment, pocket some cash [for taking over the lease] and run the miles right up,” says Mr. Davidson. “You can pick up a cheap payment and drive the heck out of one of these cars because they are under mileage.
“It’s a fantastic time to pick up a lease because of people losing their jobs and the bad economy,” he adds. “The person turning over the lease gets crushed. He has to pay about $300 to advertise, anywhere from $499 to $999 plus taxes to transfer the lease, and he has to grease the person picking up the lease.”
The four things that most impact a lease trade are: down payment, term, mileage and the condition of the vehicle because the person taking over the lease is ultimately responsible for it when it is returned, says Randy Warren, director of training with Mississauga-based leasebusters.com.
He says low mileage does attract some to the marketplace. “Salesmen love Buicks because they are driven by little old ladies who don’t put any mileage on the car,” says Mr. Warren.
“Think about some of the possibilities,” he says. “The mother could have just spent $90,000 on a Mercedes and her daughter is coming home for the summer. She doesn’t want her daughter driving her car. Think about contract workers. They don’t want to commit to something for four years.”
More importantly, think about the free mileage and maybe a few extra bucks for gas. Sounds tempting, doesn’t it?
This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com