JIM HENRY

What leasing boom?

Automotive News | December 21, 2011 - 12:01 am EST

The leasing boom that wasn't gets my vote for "F&I Flop of the Year" for 2011. With used-car values and predicted residual values as strong as they are, lease penetration could have taken off this year.

To be sure, leasing has improved. Lease penetration for 2011 will probably be up about one percentage point for the year to an average of about 20 percent of new retail volume, based on data from J.D. Power's Power Information Network. And yes, that's a slightly bigger share of a bigger number, based on higher volumes overall. But those numbers don't say "boom."

That illustrates several things:

• Leasing wasn't that high even before the recession. Lease penetration was only 22 percent in the first quarter of 2008.

• If there was a leasing boom, it happened in 2010. Leasing plunged to about 10 percent of retail deliveries in the third quarter of 2009, then returned to normal levels in 2010.

• Automakers are trying to cut back on incentives, and that includes lease incentives.

Finally, with the economy still slow people are hanging onto their cars longer. That's the opposite of the lease concept in which you never pay off your car and get a new one every three years, whether you need it or not. For most people, the times are still too tough for that.

Jim Henry is a special correspondent for Automotive NewsJim Henry is a special correspondent for Automotive News

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