With General Motors recent announcement that it would reintroduce leasing on its Buick and Cadillac models, it’s clear that the once popular auto ownership alternative is making a comeback. Two years ago General Motors and several other major automobile manufacturers stopping leasing vehicles due to a decline in residual values, decreased demand and tougher credit requirements. Additionally, several independent leasing companies cut their lease portfolios under the strain of the financial crunch.

But thanks to an improving economy and the expected stabilization of residual values, the number of consumers that are choosing to lease is on the rise. According to Automotive news, U.S. auto leasing climbed 21.1 percent through September 2010, compared to 16.6 percent for all of 2009.

Manufacturers are attracting new lease customers with competitive lease deals featuring low interest rates and increased incentive packages. The average lease incentive is $3069 per vehicle in 2010, and increase of more than $1000 over 2009.

Why Lease?
Leasing offers consumers an opportunity to drive a new vehicle for a lower monthly payment than would be required by a finance contract over a similar term. Lease payments are calculated only on the portion of the vehicle’s cost that is depreciated over the duration of the lease. Additionally, sales tax is assessed as part of the vehicle’s monthly payment and is only calculated on the value “used” during the lease term. Attractive interest rates, factory incentives, and substantial tax savings have peaked the interest of many would-be vehicle purchasers.

But leasing is not for everyone. The decision to lease depends on many factors including your driving habits and your short and long term vehicle needs. All leases have a total number of miles allowed before additional charges occur. Per mile overage costs can become substantial so it’s important to fully understand the restrictions and not exceed the specified mileage limits in the lease agreement. Also, regular maintenance (tires, brakes, etc.) is the responsibility of the leasing party so know the costs and plan accordingly.

About the author:

Reggie Britt is the President and CEO of Compass Technologies the company behind Kwik-Loan consumer finance software and Kwik-Dealer indirect lending software.