To Lease Or Not To Lease

The decision-making process on whether to lease or buy a car has been altered by automakers’ scaling back their leasing operations under pressure from high gas prices, making leases less available and much more expensive in many cases. Here are some points to consider about leasing:

PROS

New Car Frequently: You won’t have to drive the car for more than two to four years, depending on the length of the lease (36 months is typical).

No Money Down: Leases require little or no down payment, although you can make one in order to lower your monthly bill.

Lower Payments: You can drive a more expensive car for a lower monthly payment than if you’d bought it, albeit without gaining ownership equity.

Minimal Repair Risks: A leased car is always under warranty, with routine maintenance sometimes covered.

No Resale Issues: You don’t have to take on the risk of declining resale value; you just turn it in when your contract is up.

CONS:

Fast-Rising Lease Costs: Leases for SUVs, trucks and other non-fuel-efficient vehicles are getting significantly more expensive and will become harder to find as carmakers scale down their leasing businesses.

Credit Restrictions: Credit requirements have tightened, because banks are reluctant to take on any more risk than necessary for fear the residual value will drop and they’ll lose money. A spotty credit rating could make a consumer ineligible for a lease, or raise the cost.

Mileage Limits: You’ll have to pay for any additional mileage beyond the limits specified in the lease.

Long-Term Loser: Buying saves money compared to leasing over the longer term, especially after the car is paid off.

Return Fees: The fee charged at the end of a lease can be high, depending on the contract and the company. This comes on top of the contractual monthly payments.

The seesaw of gas and vehicle prices

For the past few weeks, dealerships across the country had begun to feel the heat with their large vehicle inventory. Gas prices had soared to $4.70 in some areas of the United States with oil nearing $150 per barrel. Incentives on SUVs and large trucks had shot through the roof. Today, however, Ford announced a hike in SUV and truck lease pricing to make their most profitable vehicles unattractive to new car lesees.

According to the Wall Street Journal, Ford sent a memo to their dealerships saying “due to extreme losses Ford Credit is taking on off-lease vehicles, it will be necessary for Ford Motor Credit Company to adjust residuals mid-quarter on the following vehicle lines.” This is an attempt to salvage whatever revenue they can because of defaults on leases extended to low credit rating individuals, which Ford will also cease to offer with this announcement.

Now is the time to pick up a lease if you’re looking for an SUV or truck. Gas prices have been fluctuating and seem to have settled down, and if the trend continues we may see an overall increase in SUV and truck purchases in the near future. The changes will effect the Ford Sport Trac SUVs, F-150s, Explorer and Super Duty Pickups. Use our fast vehicle search tool on Autobrag.com to find a Ford vehicle before the lease option expires on August 1, 2008.

With gasoline prices hitting record highs almost daily, you might be wondering if you can get away with filling up your expensive car with regular instead of the expensive premium gas your manufacturer recommends. The answer: Regular’s fine in most cases, but it’s best to check your owner’s manual.

There are three basic provisos for gasoline usage in owner’s manuals: when only regular gas is required, when premium is “recommended” and when premium gas is “required.” Only in the third instance will deviating from the manufacturer’s requirements potentially harm your car.

If premium gas is required, those cars are designed to run only on premium and could possibly be damaged if you use regular over a prolonged period. Cars that require premium gas are typically made by luxury brands like BMW, Mercedes, Lexus, VW and Audi, and some Acuras are also on that list.

Another effective way to save on gas is to drive like your grandmother. That means gentle acceleration, gradual braking and avoiding hard stops. Accelerating too quickly can mean you have to brake harder and that can waste gas.

According to a recent study by the California Integrated Waste Management Board, 73% of California drivers change their oil more frequently than required. This same scenario no doubt repeats itself across the country. Besides wasting money, this translates into unnecessary consumption of $100-a-barrel oil, much of it imported.

It’s been a misconception for years that engine oil should be changed every 3000 miles, even though most auto manufacturers now recommend oil changes at 5,000, 7,000, or even 10,000 mile intervals under normal driving conditions.

For several years, automakers like General Motors, BMW, and Mercedes-Benz have installed computerized systems that alert drivers via an instrument panel light when it’s time to change oil. Greatly improved oils, including synthetic oils, coupled with better engines mean longer spans between oil changes without harming an engine. The 3000 mile interval is a carryover from days when engines used single-grade, non-detergent oils. So no need to change every 3,000 miles for modern cars.

A nationwide sell-off of gas guzzlers is under way. Many people have already sold their gas hogs in order to downsize. Many others would like to, if they could only find a buyer.  A quick check of AutoTrader.com shows a marketplace flooded with big vehicles.

Consumer advocates are urging anxious car owners to slow down and do the math before they race to get rid of that larger vehicle. After crunching all the numbers, Consumer Reports concludes it rarely pays to downsize if you’ve only owned the vehicle for three years or less.

Downsizing is something that should be based on the numbers and not emotion. You might find out that it makes more economic sense to keep your low-mileage car and feel the pain at the pump each fill-up, rather than absorb a huge loss by selling an unpopular vehicle. If there’s more than one vehicle in the family, you might want to swap cars. The most fuel-efficient one goes to the person who drives the farthest. Several people at my office have already done this and it makes a difference.

If you’re shopping for a smaller car, see if it requires premium gasoline, which is averaging about 40 cents a gallon more than regular right now.  The Mini Cooper, Volkswagen Passat, Mazda3 Grand Touring hatchback, Nissan Maxima and Nissan Altima V6 all take premium. Even Smart’s little Fortwo is recommended to run on premium. 

By the way, if you need a large and roomy vehicle, there has never been a better time to buy. The selection is huge, prices are low, and dealers are willing to negotiate. And because of early trade-ins, many are new models with very low mileage.

Live By The Border? Go For It

Southern Arizona motorists who live close to the border are learning they can save a few bucks by heading to gas stations in Mexico. Mexico’s state-owned petroleum company, known as PEMEX, is the sole supplier of gasoline for the country’s gas stations. Stations in San Luis Rio Colorado were selling unleaded regular gas this week for the equivalent of $2.87 a gallon, more than a dollar less that AAA Arizona shows is the average price of fuel in Yuma. Don’t forget your passport.

Maybe an SUV isn’t so bad after all

So you might be doing the environment a favor by buying a fuel-efficient vehicle, but insurance companies seem to take advantage of your kind consideration. Check out the costliest and the cheapest cars to insure reported by MSN’s MoneyCentral below:

Costliest Collision Coverage

Dodge Neon (4 dr)

Ford Focus (2 dr)

Ford ZX2 (2 dr)

Hyundai Accent (2 dr)

Hyundai Accent (4 dr)

Hyundai Elantra (4 dr)

Hyundai Tiburon (4 dr)

Kia Rio (4 dr)

Toyota Celica (2 dr)

Toyota Echo (2 dr)

Toyota Echo (4 dr)

Cheapest Collision Coverage

Buick LeSabre (4 dr)

Buick Park Avenue (4 dr)

Chevrolet Suburban (SUV)

Chevrolet Tahoe (SUV)

GMC Yukon (SUV)

GMC Yukon XL (SUV)

Mercedes M-Class (SUV)

Toyota considers using American base for exporting to Middle East and Asia

Increasingly sluggish SUV sales, rising material costs and the strengthening Yen are all reasons for why Toyota plans to begin shipping automobiles manufactured in the United States to the Middle East. The credit crunch coupled with increasing oil prices has forced many Americans to move away from giant, gas-guzzling SUVs into more energy efficient sedans. Today oil reached a new high of over $129 a barrel with no immediate slowdown in sight.

Currently, the Avalon is being exported to the Middle East and Toyota plans to begin shipping Sequoias to an area where demand for family vehicles has steadily increased. In the United States, Toyota’s sales for the Sequoia fell 30%, which is a strong statement to be made about the dynamic US automotive market. Sequoias should begin to ship this year and there is the possibility that Sienna minivans could begin exporting to China as early as 2010.

What does this mean for the consumer who still needs a large family SUV and can foot the cost of increasing gas prices? Prices for large SUVs should begin to dramatically decrease as inventories pile up and dealers scramble to get their vehicles off their lots. Check out AutoBrag.com’s New Car Price Search Engine to find an incredible deal on Toyota Sequoias in your area.

A 2010 deadline forces manufacturer to work overtime

After losing $1 billion on the development of the EV1, General Motors completely dropped any serious discussion on building a green vehicle. However with gas prices hitting new highs and competitors starting to adjust production to consumer demands, GM is starting to feel the pinch in their pocketbook - the auto manufacturer recorded a $15 billion loss in 2005.

That’s enough to get anyone to shift gears from their current business model into a more consumer-centric one. SUVs are losing their appeal as gas prices continue to rise. GM has recently decided to drop production on a new sedan and minivan in order to support the $8.1 billion research and development budget focused primarily on green vehicles.

One of the biggest obstacles for GM will be trying to cram years of research and development into a short timeframe with the promise of an electric vehicle in 2010. In order to get the Volt into production, GM is going to have to push their 22,000 engineers to the limit to develop an incredible battery for a an incredibly hyped electric vehicle. Ford and Chrysler have already started to put out hybrid vehicles and Toyota is leading the pack with hybrids in both their Lexus and mainstay Toyota fleets, so this could be a do-or-die scenario for the American giant. Can GM successfully migrate from gas guzzler to gas free and still produce a reliable vehicle? We’ll have to wait and see how things unfold.

Increasing gas prices hurting American wallets

With oil reaching $126 a barrel today, SUV and truck owners are desperately trying to sell their trucks and SUVs but at considerable discounts. Dealerships are also starting to feel the pinch at the pump. Edmunds.com reported that cash rebates and incentives for SUVs reached over $4000 in March as unwanted SUV inventories pile up at dealerships.

In April alone, SUV sales fell 32.3% compared to a year earlier while small vehicle sales rose 18.6 percent. Crossover vehicle sales have also seen a boost in sales. Twice as many crossovers were sold compared to SUVs in March according to the Auto Dealers Association.

What does this mean to the consumer? If you’re willing to foot the gas bill every month or possibly carpool to work, you can pick up a brand new SUV with roughly $4000 cash back or incentives. Check out dealerships in your neighborhood offering discounted SUVs through our search tool on AutoBrag.com.