The incessant inventory shortage has left no corner of the auto industry undisturbed in its wake. Demand for new vehicles is higher than automakers’ abilities to keep up building them, and used-car inventory is shrinking even as prices surge to record levels. Some shoppers have the luxury of waiting out the ordeal, but others have no choice but to dive into turbulent waters. As manufacturer incentives sink and transaction prices continue to rise, the inventory shortage has also shaken up car leasing.
Related: How Does Leasing a Car Work?
If you’re considering leasing a vehicle in the coming months or you have a lease that’s ending soon, here’s how the current situation will affect vehicle choices, monthly lease rates and lease buyout.
Lease Options Shrink, Prices Inflate
Leasing a vehicle typically equates to a lower monthly payment than financing the same purchase, but the inventory shortage has turned even that pragmatism upside down. According to Tyson Jominy, J.D. Power’s vice president of data and analytics, the lack of inventory isn’t just shrinking cash incentives for a vehicle purchase — it’s also raising lease prices.
“Leasing is being challenged right now in a way not seen since the Great Recession,” Jominy said. “Multiple factors are contributing, but [the] leading cause would be the lack of inventory that is pushing up prices, which can negate the payment advantage that leasing traditionally has over loans. In fact, it’s not uncommon now for a loan payment on a Porsche Cayenne or [Land Rover] Range Rover Sport to be cheaper than the monthly lease payment.”