Nov. 13 (Bloomberg) -- Auto leasing, once a cheap way to drive an expensive car, is making a comeback.

General Motors Co. and Chrysler Group LLC resumed offering leases to buyers in August and September through their shared financing arm, GMAC Financial Services, after halting the practice as car demand fell in 2008. Ford Motor Co. plans more leasing promotions this year, while Toyota Motor Corp. makes it part of a $1 billion fourth-quarter marketing push.

Automakers and finance companies are returning to leasing as it becomes profitable. U.S. used-car prices surged to a record this year as fewer vehicles were traded in at dealerships, letting automakers get better prices for models turned in when leases end. The return of leasing may boost new- car sales after demand fell to an almost three-decade low.

“Leasing is coming back,” Jeremy Anwyl, chief executive officer of researcher Edmunds.com of Santa Monica, California, said in an interview yesterday. He predicts the practice will soon account for 20 percent of U.S. auto sales, more than doubling from the first half of 2009. Increased used-car values are “making leasing more attractive,” he said.

Higher resale values let automakers offer lower monthly lease payments without taking a loss when they have to sell the car. Ford, which has whittled its lease business to about 5 percent of sales this year from 17 percent in 2007, considers more used-car demand a harbinger of returning sales.

Ford, Cadillac Benefit

“Leasing is really a critical piece of the business because people who lease have much higher loyalty to your brand,” Jim Farley, Ford’s group vice president of marketing, said in an interview. “This is something the dealers have been asking for for a long time.”

Ford shares rose 21 cents, or 2.6 percent, to $8.41 at 4 p.m. in New York Stock Exchange composite trading. The stock has more than tripled this year.

The biggest beneficiaries may include luxury brands such as GM’s Cadillac, which generated as much as half its sales from leases before stopping the practice for a year in August 2008. Cadillac sales have fallen 39 percent this year, outpacing a 25 percent slide for the industry, according to researcher Autodata Corp. of Woodcliff Lake, New Jersey.

GM resumed leasing for all brands in August. Cadillac sales dropped 8.8 percent in September as the industry slid 23 percent. Cadillac sales rose 22 percent in October, even as its CTS sedan fell 27 percent, said Susan Docherty, GM’s U.S. sales chief.

“As we get our feet and toes back into leasing, we’ll see the CTS number improve,” Docherty said on a Nov. 3 conference call discussing sales.

Luring Buyers

Leasing made the difference for insurance salesman Richard Birns. He chose a dark gray, 2010 Cadillac SRX Sept. 26 with a pop-up navigation screen, because of the $673 monthly payment. GM’s offer included a $1,000 rebate on the car with a sticker price of $42,000.

“I can get a more expensive car for less money,” said Birns, of Jericho, New York, who previously leased an Audi T7. “I don’t have to worry about getting killed on the trade-in in three years.”

Bayerische Motoren Werke AG’s BMW is offering a $349 lease payment for 36 months on the 328i sedan, plus a $1,500 cash rebate. The car’s starting price is $32,850.

“One thing that tends to draw showroom traffic is a low lease payment because we can all relate to that,” said Jack Pitney, vice president of marketing for North America at Munich- based BMW.

The higher used-car values let finance companies offer lower monthly payments, attracting more buyers, said James Clark, general manager of Automotive Lease Guide, which sets used-car values that serve as an industry benchmark.

Record Resale Value

Used-car values soared this year as the supply of those vehicles fell because owners held onto cars longer. The Manheim Used Vehicle Value Index rose to its highest level in September since it began tracking that data in 1995. While the index slipped last month, it’s still 13 percent higher than October 2008.

The used-car supply will fall 34 percent by 2013 from 2008, Automotive Lease Guide projects. That’s a reversal from December, when used-car values plunged after years of loose leasing practices created a glut, Clark said. As higher gasoline prices reduced demand for SUVs in 2007 and 2008, automakers discounted leases to stoke sales instead of cutting production.

Automakers had to sell vehicles returned when leases ended at a loss in used-car auctions. The practices contributed to record losses at Ford in 2008 and GM in 2007, leaving automakers cautious.

Leasing will fall to about 15 percent of U.S. auto sales in the fourth quarter, down from 22 percent in 2008’s first quarter, said auto analyst Jeff Schuster, a Detroit-based researcher for J.D. Power & Associates.

“This is not the time to jump into the deep end,” said George Pipas, Dearborn, Michigan-based Ford’s sales analyst. “I describe it as jumping into the shallow end.”

To contact the reporter on this story: Keith Naughton in Southfield, Michigan at Knaughton3@bloomberg.net

Last Updated: November 13, 2009 16:13 EST