"Your vehicle is worth a lot more than you think," says one expert.
CASTRO VALLEY, Calif. (KGO) -- The Department of Labor's Consumer Price Index shows used car prices dropped last month, but Kelly Blue Book disagrees, taking a longer view. It says used cars cost about 25% more than they did a year ago. 35% more than before the pandemic began.
Why? COVID has had a domino effect on car prices. Because of auto parts shortages, there are fewer new cars to buy, making them cost more. That has driven up the cost of used cars. And this is now reflected in the residual value of lease cars.
More than a quarter of all new cars are leased. Every lease includes the car's residual value. That is a fancy way of saying how much the car is expected to be worth when the lease ends.
Deciding on that figure was once pretty straightforward, but things have changed.
Michelle Austin of Castro Valley tells 7 On Your Side, "The used car market is extremely expensive right now."
Yes it is, and that is working for her. The car she leased nearly three years ago is worth way more today than expected.
"If I just wanted to turn in the car right now the dealership has offered me about a $6,000 credit to swap the car right now, before my lease is even over," Austin says.
Edmunds.com's Ivan Drury says Austin is not alone.
"Your vehicle is worth a lot more than you think," he says, "and that's where you have some great options if you're in the market right now."
He says all dealerships want your cars -- they need cars to sell. "You know if it's 1, 2, 3 years old, it is a hot commodity, right now."
Drury says before turning in a lease car, figure out what your car is worth by looking it up on the internet. Check the residual value, subtract fees and see where you stand.
That's what Austin has done. She thinks she could net as much as 10 grand.
"I'm definitely looking at outright purchasing the car," she says, "and then turning around and making a private sale and then using that capital that I gain from it."
The average used car is now listed at $26,000. So there can be a lot of money there, especially for those who leased.
Take a look at more stories and videos by Michael Finney and 7 On Your Side.
Have a question for Michael and the 7 On Your Side team? Fill out the form HERE! 7OYS's consumer hotline is a free consumer mediation service for those in the San Francisco Bay Area. We assist individuals with consumer-related issues; we cannot assist on cases between businesses, or cases involving family law, criminal matters, landlord/tenant disputes, labor issues, or medical issues. Please review our FAQ here. As a part of our process in assisting you, it is necessary that we contact the company / agency you are writing about. If you do not wish us to contact them, please let us know right away, as it will affect our ability to work on your case. Due to the high volume of emails we receive, please allow 3-5 business days for a response.