Vehicle Leases Gaining Popularity Across America

Once used mostly to move luxury cars, leasing has reached record levels, helped by easing credit restrictions and a move downmarket.

Leases on Jaguars and BMWs remain plentiful, but the most-leased cars in America are now the Honda Civic, Toyota Camry, Honda Accord and Hyundai Sonata, according to Experian Automotive, an arm of the consumer credit-rating company.

Consumers gravitate to leases — essentially long-term car rentals — mostly because they offer lower payments. Last year, the median lease payment was $361, about 20 percent lower than the median $434 loan payment on a purchase, according to Edmunds.com.

Shoppers have pushed leasing to a record 25.7 percent share of new-vehicle sales in the first quarter of this year, up from just 16.3 percent in 2004, according to Edmunds.

Leasing attracts buyers such as Jerry Festa, a Los Angeles insurance agent who likes the “simplicity and convenience.”

“I go down, pick out the car that I want. I drive it for a few years and give it back,” said Festa, who leased two hybrids from Santa Monica Ford in the past month. “I don't have to worry about selling the car. I don't ever put a brake pad on a car; I don't ever put a tire on a car.”

The drawback? Never getting rid of the car payment. But Festa figures that's a fair price for always having a new car under warranty.

Automakers are doing their best to coax customers into leasing.

“I can't believe some of the lease deals that I see,” said Philip Reed, consumer advice editor at Edmunds.

Leasing of such practical stalwarts as the Civic sedan has taken off with attractive offers, said Brad Mugg, general manager of Norm Reeves Honda in Cerritos, Calif., the nation's highest-volume Honda dealership. The dealer leases 32 percent of all its cars.

The Civic leases for $169 a month, with no down payment. But a deal such as this is only cheaper in the short term, he said.

At the end of the contract, usually 36 months, most drivers return the car and pay for a new lease or purchase. You walk away, regardless of how much money you put into monthly payments and any upkeep.

Leases offer the option to buy the car at the end of the contract, but at a value determined when the lease starts — which may be higher than market value when it ends.

“If you look strictly at economics, you don't want to become a serial leasee because you will always have a car payment,” Reed said.

Consumers need to be circumspect, especially when the lease appears attractive.

An advertised $249 monthly payment, for example, doesn't include tax and registration fees, which raise it to about $275. Higher lease rates will apply to people with lower credit ratings. Many carry substantial down payments, Reed said.

It always pays to get bids from several dealers and to pay attention to the details — length of lease, upfront costs, mileage limits — to make sure deals are comparable.

Leasing isn't for everyone.

Nelson Holdo, a San Marino, Calif., business executive, describes himself as a “serial” lessee but had to give up the habit upon becoming president of a jewelry company that required a lot of driving.

“It doesn't make a lot of sense to lease an automobile when you are driving 30,000 miles a year,” Holdo said.

Lease contracts typically have big penalties for crossing the 12,000- to 15,000-mile mark. So for the first time in more than a decade, Holdo purchased a Mercedes-Benz sedan instead of leasing.

Holdo still leases cars for his family members, who drive far fewer miles. But he is careful to negotiate each aspect of the contract just as carefully as a car purchase.

Source: triblive.com