Better trade-in values have made foreign carmakers much more aggressive than the Big Three. Still, purchasing sometimes is better
As the auto industry finds it harder to move metal in parlous times, attractive leasing deals are cropping up, particularly from foreign manufacturers.
"In some cases, they're very aggressive," says Philip Reed, senior consumer advice editor at Edmunds.com, the car information Web site. Counting all incentives, including low-rate loans, leases, and rebates, carmakers offered an average $2,698 in incentives per vehicle in the U.S. in January, up from $2,413 a year ago.
Edmunds, which offers online calculators to help determine how attractive a deal is, ran advertised specials through its systems at BusinessWeek's request. The researchers found a lot of variety. Drivers could do well, for instance, on a Mercedes-Benz C-Class Sport four-door sedan, which fetches about $43,000 at retail. Leasing would cost $430 a month for 39 months and $4,564 at signing, if the dealer chips in $1,100. Last year, leases for the same car cost $440 to $462 a month. But if you buy the car now instead, you might shell out $590 a month for 66 months with $7,845 down—if you qualify for a special 3.9% loan. (Be aware, though, that deals can change week by week.)
With other models, particularly less expensive ones, deals tilt in favor of buying. Leasing a $22,000 Mitsubishi Outlander ES 4-door SUV would cost about $279 a month for 42 months, with $2,558 due at signing. (Active-duty soldiers and current Mitsubishi owners could get another $500 off.) Buying the same car would cost only modestly more each month—$334 a month for 60 months—with a special 3.9% loan and a $4,076 down payment. (Zero-percent financing, where available for qualified buyers, would help even more.)
To assess some recently advertised deals, Edmunds subtracted rebates, applied special interest rates being offered, and, rather than leave out often-hefty sales taxes and title charges, which vary by Zip Code, used the sales tax and title charges for Southern California as roughly representative examples. Edmunds applied a 20% down payment on purchases and used suggested retail prices.
Whether to lease or buy is as much a lifestyle choice as a financial decision. If you swap for a new car every three years or so, you might be better off leasing since you don't have to worry if trade-in values are dropping. Indeed, trade-in values have plunged so much on American cars that the Big Three largely avoid leasing. Values for foreign brands have held up, keeping them in the game. But "if you own your car longer than five or six years, you probably should buy," says John Sternal, vice-president for marketing communications at LeaseTrader.com, an online marketplace for lease transfers. At that point, you own the car and are free of more payments—aside from repair costs.