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Fewer Options for Lease Lovers
Aug 19 2008 by Sara Lacey
8/19/08
Tough Economy Leads Automakers to Rethink Leasing
Do you love leasing a car? Do you love getting a fresh, new car every few years, and not having to commit to one car for very long? You might need to get over that because car leasing is changing.
Automakers are “cutting back on leases — or eliminating them entirely — because the financing gimmick is causing big losses for companies that provided the leases,” according to a Newhouse News Service article.
What does this means for you and me? When you lease a car, the leaser (the car manufacturer) provides a buyout price at the end of the term. This price is based on speculation of the car’s value at the end of the lease. So, if you leased a Chevrolet Suburban two years ago and your lease is up in a couple of months, most likely your Suburban is worth much less today than what the manufacturer predicted. When you turn it in, it’s likely that Suburban won’t be sold by the leaser for much of a profit.
This drop in profits is leading the Big Three automakers to discontinue or change their leasing programs, according to Newshouse News. Chrysler stopped offering leases as of Aug. 1; General Motors will offer leases, but customers with poor credit will have to put down larger down payments; and Ford plans to raise its prices on truck and SUV leases.
David Thomas, a senior editor at Cars.com (our parent company), told Newhouse News that about one-fifth of all vehicle financing involves leasing. Ouch, automotive industry.
So, you have fewer options for your car-buying self. But it’s one more reason to do a little homework on financing (check out financing from your bank, for example) before hitting the dealership.
For more information on leasing, go to the Leasing Advice section of Cars.com.
As far as I’m concerned, that’s a good thing. Leasing is just a way to get me into a car I can’t actually afford. I’m glad I won’t be tempted so much anymore.