Great leases remain for foreign cars

Hand holding car key next to car with open door

You can still get a great lease if ...

... you want a car, not a truck, and

... you want a car built by a foreign automaker.

That's a big difference from what we've been accustomed to over the past decade, when the American car companies consistently offered the best leases, especially on big pickups and sport-utility vehicles.

But those deals are one of the reasons the financing operations at General Motors Corp., Ford Motor Co. and Chrysler LLC are in big trouble -- and almost out of the leasing business.

Here's what you need to know if you're thinking about leasing a vehicle right now:

When you buy a car or truck, you pay the entire price, interest on any loan you take out to finance the purchase and sales tax on the entire price.

When you lease, you only pay for the value the vehicle loses while you drive it, interest on the loan the leasing company took out to buy the car and sales tax on your part of the purchase price.

After gas prices soared to $4 a gallon, the resale value of pickups and SUVs crashed. As leases written two or three years ago expire, lenders are getting stuck with hundreds of thousands of trucks that are worth far less than they expected.

They didn't charge nearly enough to cover that unexpected depreciation and are literally losing billions on those leases.

As a result, lenders are unwilling to do leases on most American models, or they're offering leases with such high payments that they don't make sense.

The financing operations of foreign carmakers are taking advantage of that by offering some great deals on their cars, though not trucks. We've seen offers such as $198 for a Volkswagen Jetta, $224 for a Honda Accord or $359 for a BMW 328i.

If that's the kind of car you're in the market for, the traditional benefits of leasing remain:

The monthly payments will be lower than if you buy. Our "Buy or lease?" calculator can help you compare deals and make the right choice.

It's a short-term commitment. Most leases are only two or three years long. If you decide you don't like your new car, or your life changes and you need a different type of car, your next ride is never far away.

No trade-in troubles. At the end of your two years, you give the keys back to the dealer and walk away. You don't have to worry about selling it or even trading it in on another model.

Lower maintenance costs. Fewer hassles. If you're always driving a new car, it will need few repairs and most problems will be covered by the manufacturer's warranty and free roadside service.

Possible tax breaks. In many states, you don't have to pay the sales tax for the entire car when you lease, just on the portion you are buying. If you're self-employed or use your car for business, there may be other tax advantages in leasing.

But for many consumers, it's truly the end of an era.

For more than a decade, great leases made it possible for middle-class families to drive $30,000 trucks they could never afford to buy.

Now those deals aren't available, or "you're probably not going to get a lease that makes sense," says Jonathan Banks, senior director of consulting services for Automotive Lease Guide, the company that helps many manufacturers determine future used-car values.

That means all of those consumers nearing the end of a lease on a big pickup or SUV have some big decisions to make. Most will have to buy a smaller, less expensive, but more fuel-efficient car or truck.

What they won't want are the super-long loans dealers will be pushing to close sales on cars and trucks that don't have attractive leases.

Stretching payments out for 72 or 84 months is a way to lower the monthly cost and make the payments look more like those that came with the leases buyers have been accustomed to.

But here's a good rule of thumb: If you can't pay off a new a car or truck in 60 months or less, you can't afford it.