Think new-car lease and you might think of a young, single and carefree professional in a sporty little two-door.
Though that type of driver made up the bulk of the leasing market a few years ago, that’s no longer the case.
Today, a lessee is just as likely to be driving a mini-van or sport-utility vehicle, with car seats filled with pint-size passengers, as they are a two- or four-door.
Local automobile officials estimate that as many as half of the mini-vans, sport-utility vehicles and pickup trucks on the road are leased.
“The same principles apply for (mini-vans, sport-utility vehicles and pickup trucks) as they do for any other kind of car you’re going to lease: If you change cars often and always have a payment, leasing is going to work for you,” says Dick Biggs, a national lease trainer in Roswell, Ga.
“You have to ask yourself this one question: `Am I prepared to always have a monthly car payment?,’ ” says Biggs. “If the answer is yes, there’s no reason in the world not to lease whether it’s a two-door or a mini-van.”
“The whole premise of leasing is that you get more car for less dollars per month if you don’t have any money down,” says Mike Papa, sales and leasing manager at Toyota of Naperville.
What also is driving the trend is the rapidly rising sticker prices of mini-vans, sport-utilities and pickup trucks. Most of these vehicles have starting prices of more than $20,000 and luxury versions can almost double that.
“You can now find certain sport-utility vehicles that reach as high as $40,000 to $50,000,” says Biggs, president of Biggs Auto Leasing Corp. “Now that things have gotten so expensive, there’s a hitch for buyers in that the payments and upfront money are prohibitive. In a way, that makes leasing the only option.”
“As prices get more expensive, many people become monthly payment shoppers,” says Brian Kinney, sales manager of Larry Roesch of Chrysler/Plymouth/Jeep/Eagle in Elmhurst. “And the nicest thing about leasing is the monthly payment. Usually, it can be $100 to $200 a month cheaper on a vehicle such as a sport-utility.
For example, on a $29,000 Jeep Grand Cherokee, you can get a $400 lease payment for three years versus the $550 to $600 it would cost you monthly to finance over five years.”
“Right now, the residual values (what the car is worth at the end of the lease) on some of our products–such as the Chrysler Town & Country and the Plymouth Grand Voyager–are really high,” says John Kommel, leasing manager for Highland Park Volvo/Chrysler/Plymouth.
“Because of that, it makes sense dollar-wise to lease since consumers pay the difference between what the car is worth now and what it’s worth three or four years into the future,” he adds. “As these cars will be worth a lot more down the road, consumers are paying a lot less upfront.”
Those market factors are driving a healthy increase in light-truck leasing rates over the last two years.
For example, at Roesch Chrysler/Plymouth/Jeep/Eagle, Kinney estimates that about 35 percent of the mini-vans and sport-utilities it sells are leased, up from 15 to 20 percent two years ago. At Highland Park Volvo/Chrysler/Plymouth, Kommel estimated that nearly half of the mini-vans are leased. And at Toyota of Naperville, Papa says that as many of 60 percent of the 4Runner sport-utes are leased.
Most lessees are parents with children, they say, looking for cars with a little more room than a coupe or sedan.
For example, in November, Deerfield resident Clay Friedman, 37, traded in a 1986 Toyota Corolla for a leased 1997 Town & Country LXi.
Friedman and his wife have two sons, ages 10 and 7, and needed the extra room not only for hauling their children but also for car pooling.
“We often need to transport six people, which wasn’t going to happen in a Toyota with bucket seats,” he says.
Once decided on a mini-van, Friedman says it didn’t take long to decide to lease.
“If I was going to get a mini-van–and I don’t like them because I think they’re ugly–I wanted to get a mini-van with all the options and toys inside to make it more appealing,” he says. “I knew with leasing, I would get the most for my money.”
Friedman also liked leasing’s flexibility. “I have a lot of options. I can buy the car, turn it over to a new car or release the car and go on to something new.”
As with buyers, lessees prefer the look of sport-utes to mini-vans.
“Sport-utility vehicles are not as roomy as a mini-van,” says Papa. “But if you’re 35 years old and have two kids, what would you rather be seen driving in?”
Pickups are popular with those who are attracted to the look of a truck or who can’t afford the generally more costly SUV.
Though leasing is getting more popular in the light-truck market, it’s not for everyone, says Biggs.
“Leasing makes it much easier to get into the car, and that’s fine for the short end,” he says. “But on the long end, if you can’t afford to finance the vehicle to begin with, then you’re probably not going to invest the difference between the leasing payment and finance payment.
“And if you want to keep that car at the end of the lease, then nine times out of 10 you’re going to refinance the residual value,” he adds. “As a result, you’re going to have payments on the same car for six or seven years.
“That’s the Catch-22 of leasing–it’s very attractive on the front end but if you end up refinancing the residual on the back end, you miss the whole point of leasing, which is to get in and out of a car before it becomes a problem,” Biggs says.
Biggs also says light-truck lessees, especially those who believe their children and car pools may be tough on the vehicle, should consider wear-and-tear and excess mileage costs at the lease’s end.
“You pay for wear and tear whether you buy a vehicle or lease it,” he says. “But what I always tell people is if you’re not good at taking care of your car, then you’ve got to be prepared to write a check at the end of the lease or have the dealer reduce the residual down.
“Nine out of 10 people who don’t lease again say the reason they didn’t was because they had to pay for excessive mileage or wear and tear,” Biggs adds.
