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Car-Lease "Escapees" Are on the Rise -- and They're Spawning a New Industry, Too

Leases come with escape hatches, and an increasing number of people are using them -- for different reasons than might have been true a few years ago. According to the online broker LeaseTrader.com, which connects available leases with buyers willing to take them on, "escapes" are up almost 20 percent from the same period a year ago. And although someone abandoning a lease a few years ago might have simply been trading up, today they're often trading down -- and the pain of the recession is a big motivation.

Trading in SUVs
"It's absolutely a trend that we've been tracking," John Sternal, a LeaseTrader vice president, told me in an interview. "Not only are people escaping leases at an accelerating rate, but we're starting to see more SUV, pickup truck and luxury lease escapes. In years past, people were often simply through the honeymoon period and bored with their cars."

High gas prices and other economic pain is leading people to trade in gas guzzlers for economy cars, which offer both fuel savings and lower lease payments. "It's kind of a residual or continuing effect of the recession, depending on your perspective," Jack Nerad, an executive market analyst at Kelley Blue Book told me. "People try to stave off the inevitable, but eventually they throw up their hands and say they can't keep feeding the kitty." That anecdotal conclusion is supported by the evidence because, overall, sale of smaller cars is booming.

Ford sales analysis manager George Pipas says small car sales were up in both January and February, and researcher Truecar.com says new cars sold in February averaged 22.5 mpg, up a full one mpg from January. A Kelley Blue Book survey says gas prices are influencing car choices for four out of five consumers, up 11 percent since January. And hybrid searches at Edmunds.com nearly doubled from November to January.

Online lease trading is catching on
Online lease trading is a relatively recent phenomenon, but it's catching on, replacing a status quo for lease escapes that was more catch-as-catch-can -- people tried to pawn leases off on their brothers in law, or surrendered them and took a hit to their credit ratings.

LeaseTrader.com (which processed 75,000 transactions in 2010, up from 60,000 in 2009) and Swapalease.com (founded in 1999) are the dominant players. Not all leases can be traded with no strings attached, and some don't allow transfers at all, but Nerad said this kind of resistance is fading. "Some manufacturers were reluctant to play the lease trading game, but now they mostly feel it's a business they support."

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Photo: Ford
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