Auto Leasing Is Back — With Better Deals

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After several years of being considered a dirty word in car dealerships, leasing is back in style.

And unlike a few years back when the lease deals (and ridiculously easy credit terms) got out of whack, the idea of leasing, not buying could make more sense for those in the market for a new car.

So what's changed? A lot.

Two years ago, when auto sales plunged and the credit markets seized up, few people were able to lease. Heck, few people had any interest because the leasing terms were not terribly favorable. So the percentage of new car sales that were done as leading deals dropped down to 12-13%. But as the economy and credit market improved, and residual value forecasts firmed up due to a tight market, the automakers fired up the leasing business.

This spring about 21% of the sales at dealerships will be leases. That's what happens when you offer much better terms due to the availability of easier credit.

As a result, the monthly payments for many models are lower than they were last year or a couple years ago. consider the monthly payments for a three year lease of the following:

  • BMW 3 Series $460 now compared to $470 last year.
  • The VW Jetta is $169 a month now compared to $199 a month last year.

There are some cases where lease payments have gone up. Partially because they are fuel efficient models in high demand. The Toyota Prius being a good example: to lease one now would mean a monthly payment of $470, compared to a lease payment of $330 last year.

Add in the surging price of a used car and fewer rebates/incentives to buy a new car, and you see why more people are thinking about leasing a new car or truck. Depending on the model, it has become a better financial move.

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