Buy or Lease

[Mr.Krinkle]

Drivers giving leases new life

With loan rates rising, buying more costly

By MARGARET PRICE

Car dealers say leasing is seeing renewed popularity.

Car leases are making a comeback.

After hitting a low point in 2003, the deals are finding a renewed appeal as consumers face higher rates for car loans. Edmonds.com reported a 21% rise nationally in the leasing of cars and light duty trucks for the 12 months ended early December 2006.

According to research firm J.D. Power, from 2004 through early this year, leases as a percentage of car sales rose about 4 percentage points to 19.9%. In the Northeast, leasing climbed more than 6 percentage points to 27.9% of new car sales.

Earlier in the decade, interest in leasing declined, experts said, as low-interest financing and cash-back offers made buying a better deal. But rising interest rates has eroded some of those advantages.

"As monthly payments rise for car loans, someone might pay, hypothetically, $500 a month for a car loan, versus perhaps $350 dollars a month to lease the same vehicle," said Tom Libby of J.D. Power.

Mark Schienberg, president of the Greater New York Automobile Dealers Association, said leasing has long been very popular with people in the greater New York metro area.

Jesse Toprak, an analyst at Edmonds.com, said leases can put a more expensive car within reach.

"New York is an upscale market, and a market where European car brands tend to do well," Toprak said. "In these trend-setter markets, people are trying to get the most expensive car they can, and the cheapest way of doing so is to lease it."

In New York, car leasing is also benefiting from a change in the law: As one of its provisions, the federal Transportation Act of 2005 banned state laws on the vicarious liability of car leasing and rentals. That struck down a New York law that had made car leasing companies liable for damages if the cars were in accidents - even if the leasing company wasn't at fault.

Experts said New York had been the last state to have such a law on its books, which had significantly affected leasing business, especially in the 2003-05 period.

"Twelve car manufacturers stopped leasing in New York," and few financial institutions were willing to get involved, Schienberg said.

Once the deterrent was removed, all 12 car manufacturers that had stopped leasing in New York went back into the business.

But the law that deters leasing may have another life: A state Supreme Court justice in Queens reopened the vicarious liability issue in 2006, ruling that the federal ban is unconstitutional. Lawyers for the leasing industry are appealing.

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All the more reason why the new cars have to be spot on. If more people are opting to lease then price becomes less of an obstacle.

[CARBIZ]

Wow. I've seen figures of 60% for lease penetration in the Toronto area. I suspect our outrageous insurance rates and higher vehicle prices are responsible for that. I also think it is outrageous for a leasing company to be responsible for the lessee in an accident situaiton. More of the victim society crap that we live in.

[regfootball]

I'm leasing for the first time.

It came down to, do I want to BUY a small Cobalt of lease my 500 limited?

Figured I try it. We'll see how it goes. The Cobalt would only be worth 2-3 grand in 5 years.