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The Year of the Lease

November 23, 2010
Faced with slowing sales, automakers are offering the best leasing deals in nearly a decade, the Wall Street Journal reported this month. Carmakers are both subsidizing lease payments outright and shortening the length of contracts to entice new drivers. In a shift, they also are increasingly allowing customers to get out of leases early if they sign up for a new lease. General Motors this month unveiled a new leasing program that allows customers to get out of their current leases ahead of schedule if they decide by Sept. 30 to buy or lease a new vehicle using GMAC, its financing unit. DaimlerChrysler is offering an additional $1,000 rebate if customers lease their car through its financing unit. Toyota and Honda are lowering monthly lease payments by subsidizing the costs to the leaseholder. Toyota has a new leasing deal on 2005 Camrys, which Toyota Financial Services' Steve Gordon calls "very aggressive." Under the leasing deal, customers will pay $199 a month on a 36- month lease. The average payments on a three-year lease would be about $300 a month, auto industry experts say. But with the rush of new incentives, automakers are regulating deals by being more selective about which vehicles and markets receive leasing support. Ford spokesman Dave Reuter said: "Ford Motor Co., for example, is offering special lease deals in select regions and only on certain models. None of those programs are widespread. They are used sparingly and are targeted to specific regions, depending on where we are at with our specific sales." Also, automakers are shortening the leases terms. Dealers and manufacturers prefer shorter leases because the contracts get consumers to sign up for new cars more frequently. Three-year leases now represent about 37 percent of all leases, compared with 31 percent a year ago, while four-year contracts represent about 27 percent of all new vehicle leases today compared with 34 percent a year ago, according to CNW. In addition, the shorter leases increase the value of the car when placed in the used-car market, and limit the costs needed to "recondition" the car.