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Vehicle leasing makes a comeback

Hinnant says that Navy Federal offers leases that start at 24 months and go up to 60 months. Navy Federal can also offer sales tax exemptions in states that apply because it is a government agency.

Mileage standards on leases can also be adjusted, but at a price. The normal 15,000 miles-per-year can be pushed up if you think you will go over the limit. The mileage standards range from 10,000 to 20,000 miles per year depending on the manufacturer's leasing options. However, it's a better bet to lease a vehicle with low mileage terms because the higher the miles, the higher the monthly payment.

While mileage options and leasing terms might appeal to the consumer, the main issue remains the monthly payment.

The lease's allure
"For most consumers, low monthly payments are the incentive that gets them into a lease," says Hinnant.

Some credit unions, such as Navy Federal, offer potential customers no penalties for early termination and no sales tax on the lease in states that apply. However, some manufacturers are also offering lease programs that allow a customer to get out of a lease if he or she wants to buy or lease another vehicle.

In 2005, General Motors offered its leasing customers the chance to return a car if they were not satisfied. The "Freedom Program" was offered to consumers in six states allowing them to return one of three models before they had driven 12,000 miles. A lessee would lose only his or her down payment.

Litwer says, "Consumers don't want to be used-car salesmen; therefore they consider the economics of leasing a car and the ability to return the car and get a new car at the end of the term."

Litwer expects the high-end vehicle leasing market will go up 50 percent or more by 2007.

Both automakers and consumers have grown smarter in the leasing game. Automakers who once flooded the market with lease deals that left them with a deluge of low-mileage, off-lease vehicles in the late 1990s are now better prepared to market off-lease vehicles through their certified used vehicle programs.

"The trend seems to be that captive leasers stick with shorter terms. They try to discourage leases past 36 months because they want to certify the car and it's much easier to certify a newer car than an older car," says Shebesta.

Consumers will gravitate toward the best deals whether the deal comes from a captive lessor, a credit union or an independent.

"People know what they want, how much they can afford and how long they want the car," says Lewig.

Learning the lease language
The No. 1 rule in leasing is for consumers to know exactly what they need in terms of monthly payment, length of lease and mileage. Automakers and financers want repeat customers and leasing offers them a better chance at bringing them back.

"If you are completely honest with yourself and know beforehand what exactly you want and need," says Litwer, "leasing will leave you very satisfied."

-- Updated: Nov. 1, 2006
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