Car leasing has become the new best deal in new-car “sales.” Although the notorious “open-ended” arrangement of the 1970s gave leasing a bad name, leases today typically carry full disclosure concerning a lessee’s obligations at lease time, each month thereafter and at the end of the lease.For the car dealer, the appeal of leasing is obvious: Most customers return after two or three years for another lease, and a returned lease car makes a terrific second-hand car. Dean Matthies of Heritage Ford in Loveland said that 70 percent of new trucks are on lease.
“A popular four-wheel-drive truck makes an attractive lease because the truck is still worth a lot at the end of two years,” he said.
The lease also has appeal for a person who would like to drive a $30,000 vehicle for $20,000 payments.
“You can get so much more car when you lease,” explained Mark Pedersen of Pedersen Toyota, Volvo, Saab in Fort Collins. “The monthly payments are lower, the car is under warranty for the duration of the lease, and if the market changes, you can walk away from the vehicle at the end of the lease.”
With leasing accounting for at least half of new-car dealership business, are traditional lenders gnashing their teeth?
“Not at all,´ said Linda Snow at Bank One. “The lease benefits clients who want expensive cars that they will replace every two years. A car leased for business can be a tax deduction, and at the end of the lease, there might be some equity in the vehicle.”
Snow said that some banks have leasing programs in addition to traditional car and home-equity loans.
“For the client who plans to keep a car for more than three years, using a home equity line of credit is an attractive option because it allows the buyer to negotiate a cash price with the car dealer,” she said.
But anyone leasing a vehicle might face higher insurance costs. One insurance-industry official said that a car leased for two years might cost $300 more in insurance than a purchased car.