Car leasing option running out of gas
byAug 7th 2008 8:00AM
Less than a month ago, Amey Stone blogged here about leasing a new van. She may have been among the last to enjoy the leasing option, at least until the turmoil of the market settles a bit. To make money with a lease, car manufacturers/lenders need to be able to predict with some accuracy the cost of money over the term of the lease, and the value of the vehicle at the end of the lease.
In the past couple of months alone, the value of used SUVs and trucks have taken a precipitous dive in favor of high-mileage vehicles, leaving leasing companies sitting on fleets worth considerably less than projected. The mere hint of inflation that factored into the Fed's decision to leave the benchmark federal funds rate at its present level is also enough to scare already loan-wary financiers.
All is not hopeless, however. According to MarketWatch, foreign money (so much of it our own money, spent and returning home) is available to fund more conservative leases. However, given the degree to which the Big Three have depended on leases to sell their land barges, I'm skeptical that new lease terms could be favorable enough to convince gas-conscious drivers to buy an Explorer, Hummer or Silverado.
Given these circumstances, I'm thinking Amey got a deal. Let the leasing company assume the risk that her van's popularity will tank before the lease is up.