Credit Crunch, Economic Crisis Affecting Auto Leasing

<b>Credit Crunch, Economic Crisis Affecting Auto Leasing</b>“></td>
<p>(<a href=NewsUSA) – In light of the recent economic downturn, many auto manufacturers are putting the brakes on car-leasing. This, along with the credit crunch, has left consumers unsure of how they will finance their next car. Instead of asking the question “Should I lease my next car?” many consumers are asking, “Can I lease my next car?”

“Unfortunately, given the current risks associated with leasing and the overall automotive marketplace, leasing a car that has a low monthly payment is likely to disappear for the foreseeable future,” said Patrick Olsen, editor-in-chief of “And while some foreign manufacturers are still in the business of leasing cars, they are likely to cut back like many of the domestic manufacturers, or follow Chrysler’s lead and get out of the business.”

Chrysler is one manufacturer that has said it will no longer financially back leases. Other manufacturers, like Ford and GM, said they will significantly cut back on leasing deals. Foreign automakers are still offering leases, though they may soon follow the domestics. You can also lease through one of the roughly 4,500 independent leasing firms, or through any of the thousands of car dealers who have favorable arrangements with their banks, or through your own financial institution -; bank, credit union or savings and loan.

Although the leasing industry isn’t as lucrative as it once was, there are still reasons to lease a car. Maybe you are self-employed and can write off your car payment. Maybe you like driving a new car every two or three years. However, since leases typically offered a lower monthly payment than financing a new car, leasing used to be a way to get a luxury vehicle that you wouldn’t otherwise be able to afford. That scenario is likely to change. As the credit crunch continues to take its toll on the economy, leases are likely to get more expensive and harder to find -; thus reserved for the most credit-worthy buyers.

Blame high gas prices for the decline in leasing. Lease payments are based on a formula that includes a car’s residual value at the end of the lease term. In other words, when you lease a vehicle, you’re paying for the depreciation of the car. As gas prices began to skyrocket, the projected depreciation of popular gas-guzzling SUVs was much worse than manufacturers projected. The difference between predicted and actual SUV residual values this year alone led to a $4.8 billion loss for domestic automakers.

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