There is a car shortage at dealer lots right now, causing many financing companies to restrict lease-end options that were once open.

The shortage of semiconductor chips, global pandemic, and rising prices of used cars have caused several events in the automotive industry that were unpredictable and continue to be challenging for car shoppers and automakers. Now, the finance companies that back vehicle leases are tightening their collective belts and restricting what you can do with the car you’ve leased.

What is a Lease-End Option?

Whether you’re in a lease and were unaware of what you could do with your car or you’ve never leased a car and wonder what’s going on, here’s the skinny. Normally, a person with a leased vehicle can sell that vehicle to a third party for more than the residual value and then pay off the lease. This works out for all parties involved, the customer has a little extra money to use for their next vehicle, the leasing company has the contract paid off, and the third party has a vehicle they can sell. Unfortunately, dealership and financing companies are putting a halt to this practice.

Permission Must be Granted

You might be thinking that you should be allowed to sell your vehicle to anyone you want. That would certainly be the case if you owned the vehicle, but when you lease a car, you don’t own it. The financing company holds the ownership of the vehicle, and they get to say what happens with the car during the time of the lease and even when the lease ends. To sell a leased vehicle to a third party, you would have to ask permission from the financing company. Right now, that answer is going to be, “no.”

What Can You Do?

If you’re ready to end your lease and drive a different vehicle, you have a few options, but the lease-end option involving a third party is no longer one of them. The choices you’re left with are to return the vehicle to one of the branded franchised new car dealerships or to buy the vehicle yourself at the buyout price quoted in the lease contract.

For now, you can’t make money on your lease, you can’t add extra funds to the next vehicle by selling to a third party, and you have to live within the restrictions of the lease contract.

Why are Dealers and Finance Companies Restricting Leasing?

There are some relatively simple reasons why car dealers and finance companies are restricting lease-end options for customers. The most obvious reason is the competition. A shortage of vehicles can be found around the country and dealers would rather have leased vehicles back on their lots to replenish their used car inventory than to see a third party, such as CarMax or Carvana, have the vehicle and make money off it. Fewer cars on the lot mean dealers have to funnel cars they have control over back to their lots.

Profits and Competition

During times where all things are normal, there are more than enough cars to go around, and new car dealers wouldn’t worry too much about third-party companies selling the leased vehicles that have been sold. With a shortage of used cars, this is a time when dealers have a chance to squeeze the competition and keep the profits in-house. It makes sense for dealers to expect cars to come back to the dealership instead of being sent to a company that also sells used cars. Unfortunately, this doesn’t allow customers to benefit.

Which Finance Companies are Restricting Third-Party Sales?

The various finance companies that are restricting the lease-end options that you could execute are most of the large names that you know. Currently, third-party organizations cannot purchase vehicles that are leased through Nissan Motor Acceptance, Infiniti Financial Services, Honda Finance, Southeast Toyota Financial, GM Financial, Ford Credit, and Mazda Credit. There may be more names added to this list in the very near future.

To understand your rights and options, you need to contact your leasing company before you attempt to sell a vehicle with a current lease contract attached to it.

Are Automakers Helping Lease Customers?

With the added restrictions on leases, are automakers turning their backs on these customers and holding their proverbial feet to the fire with the lease contracts? Not at all. Many automakers are offering lease deals to current lease customers that have contracts that will end soon. GM is one of those companies. The programs being offered encourage loyalty and offer lower initial costs at the signing of a new lease contract. This allows you to enter a new lease, pay a little less, and have a new car to drive for the next few years.

The Future of Lease Programs

While we can’t truly predict the future, we do know that specific events will cause things to normalize once again. Right now, the plants making the necessary semiconductors for new vehicles to be finished are working around the clock. Most automakers have slowed or halted the production of some vehicles to allow the chips to arrive and the supply chain to normalize. When this happens, the lease-end options you had before will likely be present once again. Restricting lease options is not good for business and does not give customers confidence in a brand.

What Should You Do?

If you’re in a lease that will end soon, contact the financing company, and find out what your options are. If you’re required to take your vehicle to the dealership, find out if the dealership is offering special loyalty programs for you to lease another vehicle. If neither is true, it might be a good idea to secure an auto loan for the vehicle you’re currently driving so that you will own it and can sell it to whoever you want without the worry of the restrictive lease-end options.

Like most hiccups in the world, this too shall pass; we just don’t know when.