Vehicle leasing is gaining back its popularity – another sign that the economy is improving and that the auto industry is on its way to recovery. During the recession, this financing option dried up as credit became limited.
Consumers who like leasing will be pleased with this development since this option may offer more affordable monthly payments plus a new car every two years. What attracts automakers and dealers to leasing is its capacity to boost sales and the fact that customer visits to showrooms will be more frequent.
John Sternal, vice president of Leasetrader.com, an online lease tracking firm, said that vehicle leasing has “stormed back” and that there are now advertising lease deals being advertised with monthly payments that are under $199.
Sternal said that this wouldn’t have been possible 14-16 months ago. This trend is a reflection of improving economic conditions, as credit markets loosen up and banks are less strict about lending and they tend to offer low interest rates.
In addition, used car values are strong and this makes lenders more confident about a good return during resale. In order to attract customers, automakers are offering low monthly payments, and some even include cash back and require no downpayment upon signing.
As a result, customers are rushing to dealer showrooms to lease cars and trucks. However, analysts warn automakers about a leasing risk.
They say that since leased cars are resold every few years, resale values may be hurt when the market is filled with used cars as a result of numerous deals running simultaneously. For the month of March, leases made up 21% of new car sales. In February, leasing stood for around one-quarter of all car and truck sales. This is the highest monthly lease rate recorded since November 2005.