The crackdown continues, and Honda is the latest brand to end leasing benefits that many drivers have enjoyed for years.
Under normal conditions, as your lease is coming to an end, you can sell your car to any dealer willing to pay off your lease. This has been a traditional practice and has given many drivers extra cash in their pockets, but that practice is coming to a temporary end for now. This means your leased vehicle will need to be returned to a Honda dealership, where you can purchase the vehicle or end your lease.
Why Has Honda Taken this Action?
When the supply chain is humming along normally, there are more vehicles than any Honda dealer can handle. When this is the case, dealers don’t care if you sell your lease to a third-party used car dealer or not because there are more than enough new and used cars on the lot at Honda. Currently, we are dealing with a massive supply chain shortage of new vehicles, which means dealers need to control the used vehicle inventory that they can control. This means requiring leased vehicles to be returned to the dealership.
But, It’s My Car…
In reality, the vehicle that you lease does not belong to you. You’re making payments on the depreciation of the vehicle and not for the value of the entire vehicle. Your payments are typically lower than when you buy a car, truck, SUV, or minivan, and they expire at a specified time. When the payments are over, you have to return the vehicle to the dealership or pay the residual value and buy the car you’ve been driving. Essentially, the Honda leasing program you’ve entered into is similar to a long-term rental of the car that you drive.
How Does a Dealership Control Your Lease
The vehicle that you lease is owned by the financial institution that supplies the lease terms to you. For Honda, that is Honda Financial Services. Yes, the financing institution is tied directly to the car brand and the dealership where you leased the car that you drive. Because the financial institution owns the vehicle, they get to make the rules regarding what can be done with a leased car. Normally, all you would have to do is gain permission from Honda Financial to sell your lease to a third-party dealer, but right now, Honda isn’t allowing this to take place.
What Does This Mean for You?
If you’re signed into a Honda leasing program, you can continue to drive the vehicle until the end of the lease and then turn it in if you desire. If you’re trying to end your lease early, you will have to take it to your local Honda dealership, where you’ll have to pay any fees or penalties for early termination of your lease. Of course, if you want to end your current lease and enter a new lease program at Honda, the dealership may have a program that benefits you.
Why is the Supply Chain In a State of Flux
The most recent events in the world have caused a shortage of goods around the world. We’ve seen prices increase on nearly everything we buy regularly, and we want to blame politicians and those that are supposed to lead our nations, but they aren’t the reason for a shortage of products. The shortage has to do with the shutdown during the pandemic, which takes time to get back on track. Lumber was one of the first industries where prices skyrocketed because of a shortage of products, and now it’s starting to level off.
Other than forced inflation due to a shortage of goods, the automotive industry has experienced a massive shortage of the semiconductor chips that operate many of the computer systems in our vehicles. This problem means fewer vehicles being completed at factories, fewer cars at the dealerships, and empty lots around the country. The semiconductor shortage is more than just a supply issue; three major plants had shutdown troubles after the worst of the pandemic was over. Because of this shortage, the Honda leasing programs are more rigid than ever before.
Will Leasing Programs Return to Normal?
We look at most financial systems in the world and think of them as cyclical. What goes up must eventually come down, and when things go in the direction we don’t desire, we complain and worry while enjoying the opposite when things are going our way. The same will be the case with the automotive industry and the supply of new vehicles. Currently, factories that produce the semiconductor chips needed for automakers are working around the clock to rebuild the supply and bring these chips to automakers around the world.
When the trucks hauling cars to dealerships are running at full capacity again, and dealer lots have the necessary inventory of new cars for lease and sale, you will see the Honda leasing programs reset back to normal. This is true of every leasing program that has been limited by the shortage. Rather than compete with third-party entities to sell vehicles that have been on the road, Honda, and other automakers, are forcing drivers to bring their leased vehicles back to the dealership to supply the used car part of these dealerships. You might not like it, but it’s written into your lease contract and something you need to understand.
A Risky Work Around
If you know that your leased Honda is worth more than what Honda told you it would be when you began your lease, you do have at least one option. You can buy out your own lease by paying for the vehicle. This would mean you now own your Honda and can sell it to any person or company that you choose. If you’re going to get more from a third party than you would pay to get out of your lease and buy your vehicle, that might be a way for you to make a little money on your Honda. Unfortunately, this is a risky venture, and you might be stuck with the car you wanted to sell.
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