LEASING ON THE INCREASE!

From DealersEdge.com

The car industry is aggressively returning to a strategy that has burned it in the past: pushing people to lease instead of buy. After booming in the late 1990s when leases accounted for 25% of all new-car transactions, leases fell off significantly after auto makers miscalculated by offering programs that were too generous. In recent years, leases have fallen to as little as 12% of transactions.

Now, as rising interest rates make car financing costlier again, carmakers are working overtime to push their leasing numbers back up. This year marks the first time in at least four years that carmakers spent more money on leasing incentives in the first quarter than on traditional financing deals, according to CNW Marketing Research Inc.

Last month, General Motors began a pilot program, "Freedom Lease," with three car models, in which customers in markets including Boston, Atlanta and all of California can return their car in the first 12,000 miles "for any reason," according to dealer documents, and break the lease with no penalty except for loss of the down payment, which is a minimum of $1,500. Traditionally, breaking a lease means either having to buy the car outright or getting hit with thousands of dollars in fees.

Other manufacturers are expanding programs that let customers get out of a lease early if they buy or lease another vehicle. DaimlerChrysler has extended until May 31 its program, called Chrysler Financial Pull Ahead, which began in November and allows some lease customers with 12 or fewer payments remaining to waive four payments if they buy or lease another Chrysler, Jeep or Dodge vehicle. Other manufacturers with similar programs running include GM, Toyota Motor Corp. and Mercedes-Benz Credit, which launched its version in February.

Already, leases' share is up as customers take advantage of the improving deals. Ford says that at its Ford Division, about 12% of customers currently lease vehicles, higher than its 10% rate a year ago. BMW also reports a strong increase in lease rates in the U.S. in the past couple of months.