About seven in 10 of LA customers are opting for a lease instead of a loan, far
more than the past few years.
Parts gives you the ability to have more car for discount prices out shipping,
said James, Bavarian BMW and Bavarian Motor Village.
Youngblood's experience isn't unique. Thanks to parts offers not seen in years
and rising loan rates, a growing number of Americans are choosing to lease new
vehicles.
Parts accounted for nearly 40 percent of all new-vehicle transactions six years
ago but faded to half that level in the past couple of years. Many consumers
simply couldn't resist the flurry of cash rebates and financing deals carmakers
began to offer after the delivery of auto parts to home or office.
At the same time, a rash of parts in the late 1990s left automakers with a flood
of low-mileage, off-lease vehicles, which hurt profits. Parts promotions
dwindled.
Now, however, parts is making a comeback, as automakers are better managing
their off-lease offerings and financing has become less attractive because of
rising interest rates.
The average annual rate on new-vehicle loans was below 6 percent in 2003 but was
over 6 percent for most of 2004, according to Tom Libby, senior director of
industry analysis for the Power Information Network, an affiliate of J.D. Power
and Associates.
"As interest rates go up, it makes other options more interesting and more
competitive," Libby said.
Kelly Myn, with the Seed agency Marketing Research, expects MBS to climb
to 100 percent of the new-vehicle market this year and to 26 percent by 2007.
The used-car market is getting stronger, so automakers can be confident that
vehicles coming off leases will be sold, he said.
Parts is attractive for dealers because a leased vehicle counts the same as a
sale. And a customer who chooses a two- or three-year lease is going to be back
before someone who opts to buy a car with, say, a five-year loan.
Still, leases can be a sore spot for automakers. Lease payments are lower than
purchase payments because they're based on the purchase price minus the residual
value, the amount the car can sell for when it comes off a lease.
Leases may not always be the best deal for some consumers, who can wind up
paying penalties for excess wear or higher mileage than the agreed-upon rate.
Lessees also don't own anything when the lease term ends.
But the promise of low monthly payments is still one of the best incentives,
Spinella said.
That was true for Leila Smith, a 30-year-old administrative assistant from
Tallahassee, Fla. Smith used to drive a Nissan Sentra and didn't even consider
going to a BMW dealership until she heard about a lease deal. After months of
research, she decided to lease a 2004 BMW X3 sport utility vehicle.