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Old 01-21-2019, 07:16 AM   #1
AVANTI R5
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Default Leases, used car sales could be hurt by tax refunds: What to know

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https://www.freep.com/story/money/pe...ds/2525120002/

Leases, used car sales could be hurt by tax refunds
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The warnings flashed a few years back: 2019 was to be a year of the “lease tsunami.”

A glut of cars, trucks and SUVs leased a few years ago are set to come off three-year leases and return to dealer lots, driving down used car prices. In 2019, we’re expected to hit a peak of 4.1 million returns of leased vehicles.

The threat of a tsunami remains, but so far experts say the impact might not be as dire as experts and Wall Street analysts initially forecast.

Used car prices look like they might be able to hold up fairly well, as the job market remains strong and the U.S. economy continues to grow.

“What we’re seeing is we’ve got a hot economy and all these off-lease vehicles are being absorbed,” said Charlie Chesbrough, senior economist for Cox Automotive. Cox owns car-shopping websites including Kelley Blue Book and AutoTrader.

Sure, risks remain. Wild swings in the stock market, a federal government shutdown and news about layoffs at big companies, including General Motors, all can erode confidence. In Michigan, who doesn’t know somebody who is worried about losing a job?

Another lurking unknown: How exactly will your tax refund compare to last year’s payout?

Tax refund checks play a big role in selling used cars. A $2,500 or $3,000 income tax refund can be a sizable down payment, particularly on a used car.

The peak period for used vehicle sales typically follows when tax refunds have been received by most households, said Jonathan Smoke, chief economist for Cox Automotive.

Now, there’s a growing concern that some households could receive a far smaller refund — or might even owe a bigger tax bill than they’d normally expect — because they received more money each week in 2018 in their paychecks, thanks to changes in the tax withholding tables under the new federal tax law.

A Cox Automotive analysis of employee withholdings indicated that the amount being withheld from each paycheck for taxes is even less than the tax rate reduction should have produced.

Many people may not have been withholding enough in taxes out of their paychecks in 2018 to even cover the new, lower tax rate, Smoke warns.

As a result, there’s a sizable risk for a surprise in the spring when it comes to seeing smaller tax refunds.

While workers were encouraged to review how much money was being withheld and perhaps adjust their W-4 forms to have more money withheld, most people didn’t do that, according to H&R Block and others.

If the refund is far smaller, experts are concerned that some consumers may be far less motivated to go out and buy a used car.

And, of course, we don’t really know if the federal government shutdown will lead to delays of some sort when it comes to issuing federal tax refunds.

The government shutdown is making the “situation even more murky,” Smoke said.

Right now, the strength of the used car market could be used to benefit some consumers who are seeing their cars and trucks come off lease.

Consumers who are at the end of a lease might want to review the residual values — or the expected value at the end of the lease.

Brad Korner, general manager of Cox Automotive Rates & Incentives in Ann Arbor, said consumers can use information that’s available online to their advantage to understand what that leased vehicle is now worth. Online sites, such as Kelley Blue Book, can help.

You’d also want to review your lease contract, Korner said, to see the estimated residual value for your vehicle.

If the market value now is higher than that residual value, it may be possible to negotiate a better deal if you’re going to lease or buy another car.

Used-car prices saw some drops during parts of last year, but overall prices increased, according to data from Manheim, a Cox company specializing in auto auctions.

The Manheim Used Vehicle Value Index posted a 4.3 percent year-over-year increase in December.

Cars and trucks that were 3 years old ended December worth 2 percent more than they would normally have been worth had typical depreciation occurred, according to the Manheim Used Vehicle Value Index. Instead, used car prices benefited from some more beneficial appreciation during the summer.

No surprise, perhaps, but more affordable compact cars and midsize cars showed the greatest increase in values.

But remember this tip: Don’t walk into a dealership and say anything like, “My lease is up next week.” It only makes you look like a desperate shopper.

Analysts expect leasing to continue to remain strong in 2019, particularly as consumers continue to focus on a manageable monthly payment. You can still spot payments under $200 a month.

Leasing should remain a popular option for automotive consumers in 2019.

About 30 percent of new car sales are expected to involve leasing, similar to the rate the last few years, according to Scot Hall, executive vice president of Wantalease.com.

“It is likely that manufacturers will work hard to retain those clients they presently have in leases now,” Hall said. He expects to see more loyalty incentives to current lessees to stick with their current brand and there is also the potential for aggressive pull-ahead programs, as well, to trade in a leased car early for another car.

The best lease deals in 2019 will be on traditional midsize sedans, which are in less demand than SUVs and trucks, he said.

“We may also see an increase in attractive pickup truck leases being offered stemming from new model introductions like the Chevy Silverado and the subsequent sales battle between pickup manufacturers that will ensue,” Hall said.

In addition, leasing will likely gain an even stronger foothold on electric vehicles as more models are introduced, he said.

For example, the Chevrolet Cruze is being offered at $189 a month; the Honda Civic is priced at $179 a month; and the Ford Focus is offered at $159 a month, according to Wantalease.com, a marketplace for new lease deals.

The Volkswagen Jetta is priced at $139 a month on Wantalease, making it the most affordable vehicle for January, based on data from the online marketplace.

In metro Detroit, Cox Automotive spotted a 24-month lease deal for $129 a month, with $999 down, on a 2019 Chevrolet Cruze.

One 24-month lease deal on a 2019 Chevy Trax was even as low as $39 a month with $999 down.

Once again, though, consumers are warned to do their homework when it comes to a super-attractive lease promotion.

“Eighty percent of it is advertising to drive interest,” Korner warned.

Make sure to read that fine print. That $39 deal only applies to buyers who qualify for the GM employee/retiree discount — plus a leased GM vehicle must already be registered in the household. (You’re not required to terminate that lease.) The Trax is a previous courtesy loaner with about 3,000 miles on it. Those miles would be deducted from the total mileage allowance on the lease. Other details apply too.

To be sure, we won’t be able to turn on a TV or drive down a highway without seeing some $99 lease deal somewhere.

But experts warn that many of those heavily advertised lease deals apply to only a small portion of car buyers: Those with top credit scores above 800; auto industry workers who qualify for the best employee discounts; and those who may already be leasing and qualify for added discounts. Some lease deals also depend on where you live or might have higher down payments than you might expect.
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Old 01-21-2019, 09:39 AM   #2
godfather2112
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So you’re telling me the price of Jaguar F Type v8s and Type r cpo should drop? This pleases me.
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