Leasing Is Shifting the New Car Market But It Isn't the Best Choice for Everyone

SANTA MONICA, CA--July 16, 2013: A surge in car leases is helping to boost the popularity of new cars, reports Edmunds.com.

According to an Edmunds.com analysis of vehicle registrations from Polk, new cars account for about 29 percent of all sales in 2013 (through May). That puts the year on pace to top last year's rate of 27.6 percent, which was the highest penetration of new cars in at least five years. Helping to drive this trend toward new cars is a sustained push in leasing. Edmunds.com found that 25 percent of new cars sold this year were leased; the industry is on track to smash last year's record lease penetration rate of 22 percent. Additional leasing and new vs. used trends can be found in Edmunds.com's Car Shopping Trends Report.

"Lease offers have become more important to automakers' and dealers' sales strategies," says Edmunds.com Sr. Analyst Jessica Caldwell. "Luxury brands have for a long time relied on leasing to maximize their sales volumes. Now mainstream brands are riding that wave, drawing buyers with the promise of lower monthly payments through leasing."

A monthly lease payment is often less than the monthly payment on a new or even a used car. But if the driver keeps the car for six years or more, a used-car purchase generally works out to be less expensive than either leasing or buying a new car.

If drivers hope to have a couple years free of car payments and they want a vehicle they can sell or offer as a trade-in someday, then leasing is clearly not for them. They never own the car, so they can't do with it as they please.

But sometimes, says Edmunds.com, a leased car can hold its value especially well, making its residual price a bargain to pay in order to take home the car at the end of the lease. And in some cases, lessees can leverage equity that they've built up in a leased car. Finally, lessees might be able to enjoy a tax benefit if they use the leased car for work (though you should talk to your tax planner to understand whether you qualify).

There's no hard-and-fast rule that says car shoppers should focus on new or used cars, or if they should buy or lease, says Edmunds.com. But if a car shopper understands the advantages and disadvantages – as well as the math – behind each option, the choice can be a lot easier. Edmunds.com helps car shoppers understand and evaluate all ownership costs with its True Cost to Own (TCO) calculator at True Cost to Own .

Edmunds.com explains all of the pros and cons in the "New vs. Used vs. Lease" conundrum at Compare Leasing Vs. Buying .