CUYAHOGA FALLS, Ohio — For years, leasing has been an economical alternative to buying a new car, but as new car stocks continue to decline and incentives disappear it's driving more people away from those three-year deals.
Now, the ball is in the consumers' court during this car leasing crunch.
Edward Wells of Chagrin Falls started leasing a 2019 Subaru Outback after turning in a 2016 model three years ago. He said he has been in a leasing cycle for years. But this time around, he’s doing something different.
“I got towards the end of the lease and I was notified that I ought to start looking because of the circumstances in the supply chain right now. So I began taking a peek and it was a fairly easy calculation for me,” said Wells. “The amount that I'm paying for to buy my car is not a whole lot more than it would take to lease a new one.”
This week, he bought the car instead of giving it back and he’s not the only one choosing that option.
According to research firm J.D. Power, the percentage of new cars and trucks leased during the pandemic has dropped to just 19% of overall retail sales so far this year where previously it made up 30% of the market.
In Cleveland, industry experts say the decline is steeper.
“All brands are down to 30% leasing, where before the pandemic, before the chip shortage, before all these things added up. It was near 50% leasing, especially in the Cleveland market. The Cleveland market is a very strong leasing market,” said Pat Primm, Partner at Cascade Auto Group in Cuyahoga Falls.
Primm said customers are simply getting a better bang for their buck by buying right now.
“A lot of clients set up their lease to an annual mileage and they didn't hit that mileage during the COVID situation so their cars are way way under the amount of miles that they were depreciated down to. So in turn, they're a great value,” said Primm.
That’s also coupled with a new car shortage driving up prices and decreasing leasing incentives. In addition, it's causing a disruption in the used car market which relies on the turnover of leases.
“Because these cars are being gobbled up instantly by the previous owners, we don't have that stream of used cars to in turn sell to the public. So yes, it's definitely a domino effect. That's a perfect term to use,” said Primm.
So with all that in mind, Primm is urging anyone currently leasing and near the end of their deal to start doing research and making arrangements for the next step whether that’s buying or starting another lease.
“We are probably inventory down 50%. We are getting cars. The difference is as the cars come in, they're all pre-sold. So again, that's why we have to educate the clients to get out early. Get on that list. Look what's coming in and buy one of those cars,” said Primm. "In the old days, the American consumer would go to a lot and there would be 12, 15, 20 cars to choose from. And they'd say, ‘I want that one.’ Well, those days are temporarily over.”
For Wells, the decision was easy and economical.
“For me to go out and buy that car used today, a car with similar miles and the same age… You'll find out that those cars are $33,000-$34,000 and my buyout price on that car was $10,000 below that. So I immediately have $10,000 of equity in that vehicle, which I wouldn't have if I just leased a new one,” said Wells.
Jade Jarvis is a reporter at News 5 Cleveland. Follow her on Facebook, Twitter, and Instagram.
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