Auto leases in upswing

Auto leasing, temporarily crippled by the credit and financial crisis, is making a comeback. Chrysler, Ford Motor Co. and General Motors Corp. all curtailed leasing operations last year when credit markets locked up and soaring gasoline prices left them facing losses on the used sport utility vehicles and other gas guzzlers their financing arms sell when leases expire.

Business isn’t nearly back to where it was before the crunch hit, when leases made up about 20 percent of all car transactions. It is trending upward, however, after hitting a high for the year of 12.8 percent in October, up from a bottom of 7.2 percent in August, according to the automotive information site Edmunds.com.

The turnaround reflects both the slowly strengthening economy and a change in strategy by U.S. carmakers, whose sales suffered from the absence or limited availability of leasing.

“The Big Three have quietly restarted their leasing programs, even expanding them to include smaller or midsize vehicles to encourage people back into cars,” says Mark Guarino, an auto analyst for the Chicago-based market research company Mintel International.

All three have revived their leasing programs through those finance units and are able to lease cars at more affordable prices in an improved credit market and still make money. International automakers such as Honda and Toyota, meanwhile, have remained in the leasing market throughout.

Consumers still face a more challenging lease market, however.

Q: Does leasing make any more, or less, sense financially than it did before the crisis?

A: Finding an attractive deal is tougher now, and you’ll need good credit to get one at all. Beyond that, the discounts and other incentives long used to make leases more appealing aren’t nearly as plentiful.

Otherwise, the pros and cons remain about the same as before.

Leasing can give you lower monthly payments than if you purchased the same car. Or, for a similar monthly payment, you can drive a much better vehicle. Problems with the car you leased? The manufacturer’s three-year new-car warranty should protect you. For that reason, it’s advisable to have a lease term of no more than three years.

Still, it makes financial sense to lease only if you change cars frequently and can take a tax break for driving for business purposes.

Monthly payments don’t stop when you lease. If you buy, on the other hand, you could enjoy years of no payments once a five-year car loan is paid off, and you will own a vehicle that may be worth $15,000 or more.

The question to ask yourself is how much value you place on having only new automobiles.

“If it’s important for you to always drive new cars, leasing is a way for you to make that more affordable,” says Philip Reed, senior consumer advice editor for Edmunds.com.

Q: What can I do to improve my chances of finding a good leasing deal?

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