Lease vs. Own

[Kiwi]

The lease is up on my 2005 Civic in May 2009. I see that some of the major car manufacturers are pulling "subsidized" lease deals, meaning that you will have to pay the same financing charges as if you buy. In fact I think that GM has ended theirs as of Aug 01. What's the thinking out there.
Will ALL manufacturers pull the lease deals?
Should I re-up my lease on a new car now to beat the change?
Is this a "one-of" and the other dealers will not do the same?
Should the Americans get out of the Middle East so that oil prices can return to pre-war levels?

OK the last one is not for this forum... got carried away... sorry

[dwalker]

My advice would be to keep the car until the lease ends, there's no point rolling negative equity into a new car when you don't have to. The car business is always a cycle, and the "lease is best" part of the cycle is ending for now do to the U.S downturn and the over estimation of used car resale values by manufacturers. You will find the "purchase" incentives to be very attractive when it comes time to replace your car next May. Keep your options open, for both new cars and a vast array of choices in the "barely used" preowned market.
Keep in mind, when leasing started to become the best way to finance a car, there was a lot of resistance by consumers to the idea. Now, as consumers we have to change our way of thinking again to reflect the current automotive environment where purchasing is the best way to go.

[Kiwi]

When I leased for the first time I went by the rule of thumb that if you intend to turn your vehicle over every 4-5 years then the lease was the best way to go. If I wanted to buy and drive it until if fell apart then purchasing was the way to go. Are you suggesting that leasing will fade away due to the economic conditions? Do you think all manufacturers will go this route or just the ones that failed to see the folly in producing gas guzzlers?

[dwalker]

I'm not suggesting you keep a car until it falls apart, just be prepared to finance for 5 or 6 years, and trade it in by the 4th or 5th year. That is the way it used to work before leasing became popular.
In terms of how the market will adjust, all manufacturers tend to follow a trend, so if GM, Ford, Chrysler,Hyundai, Mazda, Kia, and BMW have decided to pull the leasing incentives, all others will eventually follow the trend in order to stay competitive. Even Toyota, Honda, and Nissan are losing plenty of money from residual value losses, its just not been as publicized yet. All leasing companies and manufacturers are backed by major U.S. finance institutions and residuals have been insured by major U.S insurance companies. They do not like to lose money, and the risk of that happening in the current market is very high, so they are tightening policies more and more.