(iSeeCars) — Lessees can take advantage of record used car prices that are substantially higher than calculated residual value.
- The average three-year-old used car is worth 35.7 percent, or $7,952, more than its residual value estimated at the beginning of its leasing term
- The vehicle that is worth the most compared to its predicted price is the Volkswagen Tiguan, with a 69.4 percent or $9,820 increase
- Because the market value of leased cars is substantially higher than their residual value, lessees can buy the car at the end of their lease term and sell it for a profit
Heightened demand for used cars in the wake of the microchip shortage and the COVID-19 pandemic has led to record high used car prices. While high prices and diminished inventory has created a difficult market for car buyers, consumers who are at the end of their car leases can likely buy their cars and sell them at a substantial profit.
According to iSeeCars.com’s latest analysis of over nearly 10 million car sales, the average three-year-old used car is worth 35.7 percent, or $7,952, more than its residual value estimated at the beginning of its leasing term. iSeeCars compared the projected three-year residual values of new cars from 2018 to current used car prices for three-year-old cars to see which can likely be purchased at the end of their lease term and sold for the highest profit.
“Dealers calculate a vehicle’s residual value based on its projected depreciation, and this value is locked in at the beginning of a car’s lease,” said iSeeCars Executive Analyst Karl Brauer. “With used car prices at record highs, the market value of leased cars is substantially higher than their residual value, which means that lessees can buy the car at the end of their lease term and sell it themselves for a significant profit.”
Leased Cars to Buy Back and Sell for the Highest Profit
iSeeCars determined the top 15 three-year-old vehicles that have the largest difference in value over their predicted price. These cars’ differences are 1.4 to 1.9 times more than the average vehicle. “While all vehicles are worth more than predicted three years ago, these are the cars where the difference between their current value and predicted value is the most significant,” said Brauer.
|Leased Cars to Buy Back and Sell for the Highest Profit – iSeeCars Study|
|Rank||Vehicle||$ Market Value Increase Over Predicted Value||% Market Value Increase Over Predicted Value|
The off-lease vehicle with the greatest difference from its predicted price is the Volkswagen Tiguan, with a 69.4 percent or $9,820 increase. “The Volkswagen Tiguan more than doubled in sales in 2018 over 2017 thanks to a redesign that included more space and a third row of seats, and it has grown in sales each year since,” said Brauer. “When its residual value was estimated in 2018, it wasn’t in as high demand as it is today.”
Eight small and midsize sedans make the list, including the midsize Volkswagen Passat, the compact Kia Forte, the compact Hyundai Elantra, the midsize Nissan Altima, the midsize Mazda Mazda6, the compact Volkswagen Jetta, the midsize Chevrolet Malibu, and the subcompact Nissan Versa. “Sedans typically don’t hold their value well, due to lowered demand for the segment because of consumer preference for SUVs,” said Brauer. “The shortage of used car inventory and price increases amid the microchip shortage, as well as consumers looking for more affordable vehicles during the pandemic, has heightened the demand for sedans.”
Two American performance cars also make the list: the third-ranked Dodge Charger muscle car and the seventh-ranked Chevrolet Camaro sports car. “Sports and muscle cars saw a surge in popularity during the pandemic as buyers sought fun cars to combat boredom, and the Camaro was among the used cars with the highest price increases over last year,” said Brauer. The Chrysler 300 large sedan, which is a more upscale version of the Dodge Charger also makes the list. “The Chrysler 300 likely saw an increase in demand as an alternative to traditional luxury cars, which have been in limited supply.“
The Nissan LEAF electric vehicle also makes the list, with a 52.8 percent increase of $6,742 over its predicted 2021 price. “The 2018 Nissan LEAF featured a significant bump in EV range, performance improvements, and an exterior facelift, so current off-lease models hold their value better than the previous generation,” said Brauer. “Historically, EVs like the Nissan LEAF depreciated rapidly, but elevated gas prices and increased EV adoption among consumers has further helped the LEAF hold its value.”
The Jeep Compass also makes the list. “The Jeep Compass has declined in popularity and typically doesn’t hold its value, likely due to consumer preference for other models within the Jeep brand,” said Brauer. “However, the shortage of used cars brought consumers to the Compass when they may have considered other SUVs during normal market conditions.”
Rounding out the list is the Mercedes-Benz C-Class. “Luxury vehicles like the C-Class have seen a surge in demand, likely because buyers have additional resources to spend on cars due to decreased travel and entertainment during the pandemic,” said Brauer.
Leased Cars to Buy Back for the Highest Profit By Bodystyle
iSeeCars compared bodystyles to see which have increased in value the most compared to their predicted price.
|Leased Cars to Buy Back for the Highest Profit by Bodystyle – iSeeCars Study|
|Bodystyle||$ Actual Price – Predicted Price||% Actual Price – Predicted Price|
The sedan is the bodystyle that has the highest value compared to its predicted price, while the convertible has the smallest difference. “Sedans typically don’t hold their value well due to decreased demand as consumers have a preference for SUVs,” said Brauer. “However, as used car prices rise and as SUV inventory became more scarce, consumers bought sedans due to their availability and relative affordability.”
Coupes had the second-highest increase in value, while convertibles had the lowest. “Sports cars surged in popularity during the pandemic, and the disparity between coupes and convertibles is likely because coupes are generally in higher demand than convertibles and convertibles tend to depreciate more because they are more expensive,” said Brauer.
“Consumers who are nearing the end of their lease should look at the details of their contracts to see their car’s residual value and should compare that to the car’s current market value,” said Brauer. “If their car has a substantially higher market value, they could purchase the car and sell it themselves for a major profit. They could also use that equity toward another lease or vehicle purchase, but selling the car on the private market would be the most lucrative option if possible. Consumers should also remember that selling their leased car for a higher-than-predicted price could be offset by buying their next vehicle for more than it would have cost, pre-pandemic.”
A consumer can find a car’s estimated market value through online tools like the iSeeCars free VIN check.
iSeeCars.com analyzed almost 10 million new and used car sales to determine which model year 2018 cars could likely be purchased at the end of their lease term and sold for the highest profit. It estimated three-year depreciation values for new cars in 2018 and then applied these values to obtain predicted three-year residual values. It then compared the predicted residual values to average used car prices of model year 2018 cars sold in August – October 2021.
The models were ranked by the percentage difference between the predicted residual values and average used prices, and these differences were also aggregated at the bodystyle level.
iSeeCars.com is a car search engine that helps shoppers find the best car deals by providing key insights and valuable resources, like the iSeeCars free VIN check reports and Best Cars rankings. iSeeCars.com has saved users over $306 million so far by applying big data analytics powered by over 25 billion (and growing) data points and using proprietary algorithms to objectively analyze, score and rank millions of new cars and used cars.