Financing personal choice

A tough economy, rising fuel prices and free-falling values of big sport utilities have left the vehicle-leasing market in a state of flux.

But some companies' financing wings continue to lease cars, and it can be a good way to pay for a car now. "For those people who leased cars over the past two to three years, undoubtedly it was the best they ever did," said Harold Arnold, president of Sentry Buick Pontiac GMC in Charleston. They did "a lot better than the stock they bought," he quipped.

What put some manufacturers in a jam was the educated guesses they made on the values of car when leases expired in two, three or more years. The so-called residual value plummeted on gas-guzzling vehicles as fuel prices surged somewhat unexpectedly to $4 a gallon. For instance, the value of a GMC Yukon dropped to 48 percent of its sale price over three years, he said.

In the mid-2000s, a few companies in particular priced the leases based on sport utilities and other gas-guzzling cars staying popular in a market where fuel hadn't skyrocketed. With fuel prices surging, companies are left holding on to vehicles they won't make money on.

Among the recent fallout:

--Chrysler Financial, the manufacturer's consumer lending arm, said it's getting out of the leasing business. Ford's financing arm also is curbing leases.

--General Motors' GMAC financial wing said it's scaling back on leases but it's committed to continuing with them.

--Chase Auto Finance in late July said it would stop financing leases for Chrysler cars and trucks due to the declining value of its portfolio in general.

Arnold noted that leasing is just another form of financing a car. "There's three ways, write a check, finance (a purchase) or finance the use," which would be a lease. Leasing, he said, is "very person specific." Once shoppers consider a lease, the most popular brands have been Pontiac and GMC. "We don't lease pickups," he said. "Most people buy pickups and use it up."

Tony Beasenburg, new car manager at Hendrick Honda, said a lease "makes sense for a lot of different customers." Some may be ready for a new car in two to three years, others may be advised by their accountants to lease instead of purchase for tax reasons.

"Our numbers on leases are probably going up a little bit," he said, in part because vehicles are getting more expensive. "Your average car costs $30,000."

While Honda leases many of its brands, Civics and Accords have proven to be most popular. Their values leveled off a few years back when gas prices were moderating. Then as fuel shot up in price, the compact and midsize cars were more highly sought after. That's left some customers with a windfall after the lease expires, which they can put toward a new car, for instance.

"They are a hot commodity," Beasenburg said.