The concept of leasing a car became a big deal during the 1990s and early 2000s because it was easy to borrow money. As a result, people could lease cars that they could not afford to buy and the automakers would make more profits.
Now prices are falling and there is a credit crunch. Moreover, vehicle models such as SUVs and pickup trucks have experienced a devaluation. This means that when the lease is up and the vehicles are brought back to the dealerships, the dealers are having a very, very tough time selling them. In short, they are getting stuck with models they can’t sell and that means that the auto makers have to take enormous write offs on the loss. Thus, leases are now frowned upon by domestic auto makers and some say it is time to wave them goodbye.
Others are saying that some dealerships will continue to offer leases but they will differ from dealer to dealer. In fact, each dealer is acting independently to finance the leases and working with different banks to negotiate them. It will be more difficult for watchdog groups to keep an eye on what’s happening because everything will be so de-centralized. So people who are taking those leases have to be very, very cautious about what they are doing. They need to know who is providing the loan and go to a number of dealers to assure they are getting the best and safest deal possible. Almost sound like the wild west, doesn’t it?
Another fallout to the curtailing or ending of leases is that more people will turn to the cars that they can afford to buy. That means more smaller, lower priced vehicles should sell better in the U.S. market.