The leasing option.

• Author: Richardson, Jeffrey
• Position: Alaskan autmobile leasing market

For dealers, automobile leasing builds relationships and product confidence. For businesses and other consumers, leasing provides an often advantageous alternative to outright purchasing.

Nationwide, tight money and rising car prices have increased the appeal of automobile leasing. But the Alaska leasing market is somewhat limited, according to auto dealerships and car rental agencies that provide leasing programs. Agents at those businesses say local financial institutions are not eager to back the leasing option. Another reason cited to explain the small leasing market is that Alaskans enjoy higher levels of disposable income than many other Americans and simply prefer to own their own wheels.

For dealers, offering a leasing program either for personal or business applications can be a boon. In addition to providing a ready stock of used cars with a known history, leasing creates an ongoing relationship with a customer that may continue as a leasing relationship or lead to a purchase.

Manufacturers, which retain ownership of leased vehicles until they are sold, had sought to overcome lagging sales of recent years, the result of rising vehicle costs and the six- to seven-year auto buying cycle now typically followed by many Americans. The automakers first tried extending loan periods, up to six years in some cases. When they ran out of extension room, manufacturers began emphasizing leasing as a way to create more contact with potential buyers.

"It's a better way to monitor customer loyalty," says Mike Ryan, fleet sales manager for Worthington Ford in Anchorage. Depending on the dealership, from 5 percent to 20 percent of car sales derive from converted leases in the Anchorage market.

Leasing offers customers a chance to save money and avoid trade-in hassles. Most lease agreements require a security deposit and a cash sum equal to two months rent on the car. The leasing agreement may be closed end or open end in structure. Closed-end leases are more popular because they don't require additional money at the end of the lease if the resale value of the vehicle has dropped below the original estimate of the value.

With the more common closed-end lease, assuming there's no excessive mileage or wear on the vehicle, the customer returns the car with no extra costs. But some customers may find restrictions that apply to be onerous or inconsistent with their intended use of the vehicle.

The open-end lease does not guarantee an end-of-lease value...