Behind the Wheel with Phil Lebeau

Smart Move: Smart USA Latest to Add Leasing

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At face value, it is not the biggest story in the auto industry. But it is one more important sign the auto market is returning to health.

Smart USA is going to start leasing its cars. The deal for a smart fortwo over three years would be $169 a month. Not a bad deal, especially if you are looking to get into a car at a relatively low price.

But the broader story about the leasing market shows the consumer credit market is slowly improving. Remember what happened to leasing over the last years? It practically dried up. GM and Chrysler stopped leasing cars in '08 due in large part to the credit crisis pushing borrowing costs higher and plunging residual values for vehicles coming off lease. After a year out of the leasing game, GM and Chrysler are back.

America is still far from where it was in the late 90's and early 2000's when 23-24% of the car business revolved around leasing. They were heady days for dealers and consumers. Dealers played off the roaring economy to push incredible lease deals across the board, but especially with high-end cars. For consumers, the leasing deals were so attractive they could get into a luxury car with amazingly low monthly payments.

Will we ever see those kinds of lease offers again? Not anytime soon. The combination of cheap credit and over capacity in the industry won't be seen anytime soon. It could eventually happen again, but auto industry leaders realize how much they got burned by bad lease deals and don't want to make that mistake again.

Still, smart USA and other automakers are looking to tap the growing demand for news wheels and believe leasing is the way to do that.


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