It’s the one-year anniversary of “Cash for Clunkers,” but apparently, the financing option didn’t pan out so well and consumers are feeling “clunker” remorse.
Many auto lease consumers want out, at least according to LeaseTrader.com, which released a report on Aug. 3 showing a growing number of consumers who leased a car under the “Cash for Clunkers” plan introduced last year regret it.
The main problem, according to Miami-based LeaseTrader, are the lease mandates issued by the federal government. To qualify for the Cash for Clunkers discount, lease customers had to sign up for five-year deals, but that’s turning out to be too long and expensive for the lessees. Five-year leases put wear and tear on a vehicle — wear and tear that customers pay for after returning the car when they’re done.
According to LeaseTrader, the company, which matches people wanting to get rid of their leases with people willing to take them over, says they’re receiving about 150 calls per week from people wanting out of their Cash for Clunkers lease deal. Mostly it’s because they’re worried about the economy, or may have lost their jobs and thus can’t make the payments. Others want out simply because they’re bored with their new vehicle.
John Sternal, a vice-president at LeaseTrader, says these customers are suffering from “clunker remorse.” Unfortunately, these lease owners put themselves in a box — not many people want to take over a car lease with 30 months or more left. The optimal “takeover” lease timetable is 15-18 months, says LeaseTrader.
“They still have 48 payments left and few people on the buying side are interested in taking over a lease longer than 30 months,” Sternal says.
LeaseTrader’s CEO, Sergio Stiberman, agrees. "It will be difficult for these people to exit their lease because there is very little market for a used car with three or four years left," Stiberman says. "Many of these people didn’t have a car payment when they took advantage of the rebate. Now they have a monthly payment and five-year commitment, which is extremely unfavorable in a leasing environment."