Whatever their pocketbooks can afford, Americans are leasing cars for both personal and business use in increasing numbers, reports Runzheimer International.
Figures available indicate that about 22 percent of all new BMWs are leased, and about 35 percent of new Mercedes in major metropolitan areas on both the East and West coasts.Five years ago, 475,000 Americans leased their cars, compared to 900,000 last year, the management consulting firm reported.
Based on a three-year, closed-end lease, a Mercedes 300E costs about $7,740 a year; a Ford Escort LX, $2,500; a Jeep Cherokee, $5,520; a Buick Park Avenue, $5,064; and a Ford Thunderbird, $4,380, reported First American Leasing of Atlanta, which supplied the information to Runzheimer.
"Of course, buying a car is still the economical choice over the life of the car," said Larry Snyder, executive vice president of Runzheimer's transportation division. "At the end of a lease you walk away. If you own the car, it has residual value and you can trade for a newer model."
Why do people choose to lease? "No down payment, lower monthly payments and convenience," said Snyder. "Basically, you can drive more car than you could otherwise afford. If you do have the extra cash you can invest it rather than put it towards the down payment."
With a closed-end lease, where the leasing company determines a fixed price for the residual value of the car at the end of the lease, you also have an "end-of-lease purchase option," based on normal driving conditions, he said.
"You can buy the vehicle and continue to drive it, use it for a trade-in or sell it privately," said Snyder.
"But just like purchasing a vehicle with financing over time, you generally pay more for the car under an end-of-lease purchase option, when you also consider the total lease payments, than if you had bought it outright at the beginning."
However, Snyder predicted that personal leasing will continue to grow steadily into the 1990s. "The public wants alternatives to fit a variety of lifestyles," he said.