It’s like we’re living in 1963.
I honestly don’t know when the average car payment in the United States was below $100, but I do know that today it sits at just over $480. If you buy or lease a new car in this country, odds are pretty good that you’ll be somewhere in the $200-$500 per month range. The lower end of that range is reserved for low-payment leases and bottom-of-the-barrel entry-level cars.
So when one of the world’s largest automakers promotes an $89 lease, or even lower in some areas, people will pay attention.
The lease is being offered in some parts of the country on the Volkswagen Jetta, a car already ubiquitous among economical sedans.
The bargain lease deals on the $17,325 Jetta are available after a $2,500 down payment and run over a 3-year term. Automotive News says the offer went as low as $39 per month in San Jose, Calif., and $99 in Boston. For some perspective, the total cost on the $39 lease, including down payment and 36 monthly payments, is just $3,904.
These ultra-low lease payments tell me two things:
- Volkswagen is struggling and needs to move cars.
- Volkswagen is amping up for something new.
Volkswagen is the world’s second-largest automaker but strives to overtake Toyota to become number one. Sales in the U.S. have declined over the last two years, which obviously is keeping VW from reaching its goal. By lowering lease prices on the Jetta, the company can pump up sales numbers while hoping to lock in buyers for something new at the end of their leases.
In short, the theory is that low lease prices move more cars now and can lead to higher-priced purchases in the future. The strategy is sound, because all people who lease new cars must return to their dealer in 3 years, when they’ll see all the new vehicles Volkswagen has been working on.
But there’s a downside.
Customers aren’t likely to stay with Volkswagen after their lease ends if they haven’t been happy with their stripped-down basic cars. Plus there’s a risk that they’ll perceive VW as an ultra-cheap brand and have a hard time justifying a higher-priced purchase.
Regardless of Volkswagen’s motives, the immediate benefit to car buyers is clear. If you’re in the market for a new car, it’s probably worth checking out your local Volkswagen dealer to see what kind of lease options are available in your area.
Would you lease a new Jetta for $89 per month?