Autotrader: Why automakers are closing this loophole in your car lease

This post was originally published on this site

Several automakers are cracking down on a loophole that has long allowed drivers of leased vehicles to cash in on higher-than-expected resale values. In an effort aimed at boosting their dealers’ used car inventories, Acura and Honda
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are the latest brands to join a growing list of automakers to require leased vehicles to be turned in at their dealerships.

Previously, lessees could shop around and take advantage of a higher buyout offer from a competing brand’s dealer or even a car-buying service such as Carvana
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or Vroom
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.
In these situations, the dealers pay the lease payoff — based on the car’s residual value when it was originally leased — directly to the automaker’s finance arm, and the shopper drives off in a new vehicle. That leaves the dealer who paid off the lease with what’s generally a late-model, lower-model vehicle to sell.

More: Should you buy your leased car? Yes, here’s why

In a statement, Honda said American Honda Finance Corporation — which administers leases for Honda and Acura models — will alert lessees that they must turn in their vehicle to one of the automaker’s dealers. General Motors
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and Ford
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have both enforced a similar policy. American Honda Finance Corporation says it will reconsider the decision later this year, however.

There’s still one loophole, though: lessees can pay the car off, though this either requires writing a hefty check or securing separate financing. Handling a buyout privately can be more challenging than letting a dealership do it.

Also see: As new car inventory dries up, here are the ones that are almost impossible to get

Consumers have been taking advantage of the loophole, especially as used-car values have skyrocketed due to a shortage of parts needed to assemble new vehicles. In some cases, dealers and car-buying services have been willing to buy out a lease for far more than the car’s lease payoff value.

This story originally ran on Autotrader.com.

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