Affordable Car Leases Make a Comeback

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By Dan Strumpf, AP Auto Writer

NEW YORK (AP) — At long last, it's a good time to lease a car again.

That's because a number of factors have been working in consumers' favor to make the leasing market affordable and accessible for the first time since the financial crisis began in late 2008.

Just take a look at the deals. At Volkswagen, shoppers can get a three-year lease on a new Jetta for $199 a month with $2,499 at signing. Chevrolet is offering 39-month leases on the Malibu for $199 a month and $2,738 at signing. And Honda is touting a particularly aggressive promotion, offering leases across nearly its entire lineup for nothing down, nothing due at signing, no security deposit and no payment for the first month.

"That's unheard of in leasing," said John Sternal, spokesman for the lease swapping Web site Leasetrader.com. "There are carmakers out there offering some great deals."

Those are just a sample of the cheap leases on the market. Several factors are coming together to make leasing easier again.

First of all, the financial sector and the broader economy are slowly starting to recover. And when banks start making money again, they become more willing to lend. That's contributing to a general easing in the market for credit, including leases.

Second, residual values are climbing. Residual values — or a new car's estimated value as a used car — are important because lease payments are determined in large part by what a car will be worth when the lease is up. If its value holds up well, the lease becomes cheaper.

Third, automakers are offering discounts. Car manufacturers are always spending money on incentive programs like cash-back offers or low-interest loans. But in recent months, more of the focus has been on inexpensive leases.

Toyota has been particularly aggressive with its lease offers. The Japanese automaker, which is looking to move past its massive recalls, last month rolled out zero-percent financing and inexpensive lease deals on nearly all of its recalled models. A new Corolla can be leased for as low as $179 a month, the automaker said.

It wasn't always this way. Starting in late 2008 and continuing into last fall, auto leasing virtually dried up. In 2007, leasing made up almost 18% of all new vehicle sales in the U.S., according to market research firm J.D. Power & Associates. In 2009, that number fell to 13%. Among the Detroit Three, it was 3%.

The credit crunch was largely to blame. And General Motors and Chrysler virtually stopped leasing altogether as they went into bankruptcy protection last year. But in the first quarter of 2010, leasing rose to 19% of all new car business.

"In late 2009 through 2010, you start to see those concerns (over leasing) alleviate," said Thomas King, an analyst with J.D. Power. "You start to get a bit more stability and then you start to see the provision of leasing increase."

Before running out and getting a lease, make sure it's for you. Although leasing is usually cheaper than buying, you never own the leased vehicle yourself. But if you like having a new car every few years and your credit history meets the often-tougher criteria for a lease, then now is a good time to get one.

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