Report: Auto leasing surges to highest level since 2005

Leasing is back in a big way, says The Detroit News. After virtually disappearing, lease packages with monthly payments below $199 and no money down are popping up everywhere lately, and those deals are finding consumers. Take it as a sign of economic improvement, but the reemergence could come back to bite automakers in a few years, too. With leases accounting for more than twenty percent of new car sales in February and March, a whole bunch of returned vehicles could flood the used market in just a few years, cratering the resale values that make automakers and lenders so enthusiastic to offer good lease terms right now.

If irrational exuberance takes hold again and artificially low, unsustainable lease rates are used to pump up sales figures, it's hard to see how we're not in for an eventual crash. Attractive lease deals on brand-new models like the Chevrolet Cruze are cause for concern to some analysts. Leasing is more often used to move luxury vehicles and aging models, so coming out of the gate with a sharp lease deal smacks of a grab at market share. General Motors counters that it has merely brought leasing back to 15-20 percent of sales, a healthy level, and it's being careful.

Dealers are happy to see the increased showroom traffic the new surge in leasing has brought. Many stores saw sales implode as the recession was busy taking everyone off a cliff. Being able to offer a popular car with an affordable payment again is an effective sheepdog to direct people into dealerships, and besides, the used car market has been depleted for months thanks to measures like Cash For Clunkers and people holding on to their cars longer, keeping them out of circulation.

[Source: The Detroit News]

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