Leasing Down, Causing a Domino Effect of Issues

Vehicle leasing is down drastically since the pandemic’s onset. Leases made up about 17% of new-car deliveries as of last July, down from 31% in January 2020, just before Covid struck the West, according to credit rater TransUnion.

According to a TransUnion study, fewer than 25% of consumers who ended a vehicle lease in July signed new leases, an approximately 45% decrease from January 2020. The trend could keep used-vehicle prices elevated, it said, since there’s a smaller supply of formerly leased vehicles to feed demand.

The report indicates consumer loyalty falls among consumers returning leased vehicles who take out a vehicle loan instead of leasing again. Their monthly payments consequently increased an average of $217.

“This could pose a challenge to captive lenders that rely on leasing as an effective way to keep consumers in the original equipment manufacturer (OEM) brand portfolio,” the report says.

The report advised dealers to proactively pursue leasers via marketing, as it projects an average of 870,000 leases to end in each of the next six quarters.

“And with early terminations becoming increasingly common, knowing when, where and how to engage with lessees will help mitigate the risk of losing them.”

DIG DEEPER: Auto Leases Fell in 2022