Did you hear the news coming out of Edmunds.com just before the holidays? Leasing increases 21 percent in 2006. It seems as though DealerTrack’s Raj Sundaram’s prediction of its revival back in November is on par so far. He said then that leasing would probably hit 25-percent penetration by the second quarter. But that’s what has regulators concerned.

In Doug Walsh’s view, the industry is facing a paradigm shift if it doesn’t do something about the current trend of selling based on monthly payments. Walsh, who serves as chief of the Consumer Protection Division for the Washington Attorney General’s Office, said the scenario he sees playing out is consumers driving one car while paying for three.

This month the magazine tackles several compliance issues dealers face today, such as adverse action notices, the pesky 8300 form and payment packing — something Walsh knows about all too well. It was his office that took action against four dealerships and three reputable F&I providers in the well-publicized 1999 case involving payment packing. And although he’s seen the practice decline in his state, he says the industry has other issues it must address.

Walsh fears that outside pressures, such as the rough patch U.S. automakers are enduring, the uncertain economy, faltering consumer credit and the housing market, could push dealerships to do things the wrong way, especially with consumers putting more emphasis on the monthly payment.

“These broader conditions can increase pressure among dealerships to allow for a deceptive sales process,” he said.

With some good news coming in at the close of 2006, analysts remain cautious about the state of the economy.

The Conference Board reported just before the New Year that consumer confidence hit an eight-month high in December. However, Experian noted in November that the national average credit score dropped seven points since 2001, and reported that the rate of late payments also increased. So, not everything is so rosy.

Automotive insiders were already predicting in December that light-vehicle sales in 2007 will see its lowest drop in nine years, about 16.4 million units. This is following a year (2006) that insiders say was the second worst year in a nine-year span, which insiders put at 16.5 million — about 2.9 percent below 2005. Many are blaming the slowing U.S. economy and falling home prices for what’s going on.

I remember the days, months and years following September 11, 2001. I just couldn’t write enough about consumer confidence, as it served as a bellwether for how the nation was reacting to the World Trade Center disaster. Would consumers hold onto their discretionary dollar for fear of what was to come? While consumer confidence is indeed something that needs monitoring, the housing market has quickly taken its place as the crystal ball of what all industries face.

And things aren’t looking so good. Well, depending on whose Kool-Aid you’re drinking.

In December, the National Association of Realtors presented a brighter economic picture of the housing market, reporting that the sale of existing homes edged up 0.6 percent in November. The report marked the second straight month of increases in the sale of existing homes since the spring of 2005.

Despite the good news, economic analysts say more is needed before anyone can safely say the fears of a recession are over.

“Last month (November), former Fed Chairman Alan Greenspan was right when he said the worst is behind us,” noted Alexis McGee, president of Foreclosures.com, a California-based real-estate investment advisory firm and publisher of foreclosure property information. “Weak housing markets aren’t over yet, but they’re getting strong with the help of a drop in unsold inventories and interest rates at 45-year lows.”

Reporting on November sales, McGee noted in her site’s January e-newsletter that all the good news was little solace to the nearly 877,000 homeowners nationwide that were forced into foreclosure in 2006 — up 36 percent from 2005.

The article goes on to note that many consumers counted on creative mortgages and low teaser rates to buy homes they couldn’t afford. Now, many are left with little option but foreclosure.

Hmmm, that sentiment does have a familiar ring to it. As a newbie in the industry, all I can do is bring you the news. But if you ever listen to some of the industry’s leading experts — I think their views on the economy and today’s consumer will be similar to even those outside the industry.

“Expect a paradigm shift in the F&I office,” David Robertson, president of the Association of Finance and Insurance Professionals, said during the magazine’s F&I Conference and Expo in November. “Price was a leading factor for most people buying a car. Price is not a factor anymore — the monthly payment is.

“At some point, this is going to come to a reckoning.”