More car shoppers deciding to lease instead of buy

  • Auto leasing is on the rise at Smothers European and Mercedes Benz of Santa Rosa where the Mercedes C250, left, and the Volvo S60TS are the hot models.

    (photo by John Burgess/The Press Democrat

Consumers shopping for a new set of wheels are increasingly choosing to lease, rather than to own, their cars.

The boom in leasing is being driven in part by fierce competition for buyers, lower monthly rates for leases and a hot used car market, experts said.

But some in the industry are concerned that with the rise of leasing, manufacturers and lenders are assuming more of the financial risk.

Dealers in Sonoma County are seeing more drivers who like to change up their high-end cars every few years and early adopters who want to keep up with the latest advances in electric vehicles.

At Silveira Buick GMC, the volume of leases has doubled in the last year, said co-owner Scott Silveira.

"People are asking about leases, because they're aware," Silveira said. "They see the payments manufacturers are advertising on TV or in print. You can get a lot of vehicle with just a little out of their pocket."

Nationwide, leases accounted for a record 27.5 percent of all new vehicles financed during the first quarter, up from 24.4 percent in the same period a year ago, according to Experian Automotive, which tracks data on auto sales. Just four years ago, less than 17 percent of new cars were financed through leases.

So, why do monthly payments for leases look so small?

Those monthly payments typically cover the car's depreciation and interest, but cars haven't been depreciating very much. Since used cars have been in demand and selling for higher prices, the leased cars are expected to sell for good amounts when the lease period — typically two to three years — is up. The higher the resale value at the end of the lease, the lower the monthly payment. That leaves a market where the monthly payment to lease is often cheaper than the monthly payment to buy the same vehicle.

"The manufacturers are really, really pushing for it," said Roberto Galvez, general sales manager for Henry Curtis Ford. "Obviously to them there's a benefit of having them come back two or three years down the road. And one of the ways they're accomplishing that is with absurdly low rates."

© The Press Democrat |  Terms of Service |  Privacy Policy |  Jobs With Us |  RSS |  Advertising |  Sonoma Media Investments |  Place an Ad
Switch to our Mobile View