The Return of Leasing, Let the Good Times Roll?

Chrysler said recently that it was getting back into the leasing game. While this is an indication of good news, don't get too excited. You probably won't be seeing the bargains which sunk the ship back in 90s.

A lease payment is based on residual value of the vehicle. So cars that hold their value (think Hondas, Toyotas and BMWs) make good lease cars. Cars that have poor resale value (think Chrysler and other domestic cars) are not good for leasing. American manufacturers tried to ignore the simple math of this residual rule and it came back to bite them in the shorts.

But now Chrysler is back. And GM and Ford are leasing too. Is there some case under which this could possibly make sense? Sure.

One of the good things about leasing is that you don't care about depreciation. Or at least, if you can find a low lease payment, for a short term, with low drive off fees, you don't care. Also, leasing can provide a nice tax break if you use your car for business.

But it boils down to this, how can you find the best lease deal?

Well, there's a dirty little secret called the "subvented lease." By tweaking the lease formula a manufacturer can offer a car for unrealistically low monthly payments. They either lower the interest rate or pretend the residual value is better than it is. This kind of thing is what got Chrysler in trouble in the first place.

When leases are subvented we list them on our Latest Incentives page. Right now, most of the lease specials are for Asian and German cars.

If you feel you really have to lease, compare payments and see what it will cost. You can use our Lease Calculator to get an estimate of your monthly payment. (Reminder, lease for three years or less and put only $1,000 or less down as a drive off fee; if you drive more than 12,000 miles per year, buy the miles ahead of time).

So if you go the leasing route, make sure you shop around for the best deal. For a stem-to-stern look at leasing check out 10 Steps to Leasing a New Car.

Posted by

Philip Reed September 30, 2009, 1:00 PM

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