Auto leasing: soon a thing of the past?

October 10th, 2008

what will happen to them all?

Lease returns: what will happen to them all?

Auto leases could become much more of a burden; for everyone.

By the looks of it, there could be a perfect storm brewing in the next year for consumers, banks, leasing companies and dealerships as the economy sinks, leases end and the vehicles are returned.

Already, according to a recent NY Post article, there’s a surge in people trying to get out of leases because they can’t afford the payments anymore. Companies like www.tradealease.com have seen thousands more transactions this year than normal.

And that’s not even where the real problem begins. As leased vehicles are returned, very few people are going to buy them.

Consumers who are interested in buying a lease return will have a heck of a time getting approved for a loan, which could mean banks and leasing companies getting stuck. Big time.

Normally when a leased car is returned, the consumer can buy the car, lease another or walk away. For many, buying the car will be out of the question. Few will want the commitment of another 3-year lease payment. Most will simply walk away, leaving thousands of unwanted vehicles in the ownership of the leasing companies.

There a few possible outcomes of such a scenario:

1. Leases will become just as difficult to obtain as loans, as leasing companies tighten their requirements to minimize risk. Lease payments could become equal to loan payments, which would further deplete the leasing business.

2. The cars that have been returned will be sold well under market value, as a way for leasing companies to clear their massive inventory and minimize their losses.

For those who are in the market for a lease-returned car, those potential bargains might be worth keeping an eye on.

Regarding the state of leasing in the future: What do you think will happen? Are the days of leasing vehicles numbered?

If you are currently leasing, what do you plan to do when the lease is up?

-tgriffith

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  1. | #1

    As long as cars depreciate, we will have car leasing. People simply don’t want to put their money into an asset that loses its value and that they know they don’t wish to keep forever. Leasing will go as the economy goes. It will improve when things pick up.

    Regards,

    Rob
    Monthly Car Lease

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