When incomes are rising fast, consumers tend to buy vehicles, but when the economy is slower, they tend to lease more because of lower monthly payments. Another reason is that auto makers are offering fewer leasing deals with small down-payments and low monthly payments. In the past, they had been too optimistic about the value of a car at the end of the lease. Banks had made similar errors and some no longer back leases. Cash incentives and low-interest loans are more likely in the future.
Consumers spend their incomes on leasing cars as well as other goods.
Draw a diagram with car leasing on the vertical axis and all other goods on the horizontal axis. Add a budget line and an indifference curve that is tangent to the budget line. Mark the initial equilibrium. Show the effect of this on the budget line. Draw a second indifference curve tangent to the new budget line which is consistent with this fact.