How high can leasing go?
Leasing hit a record 26.7 percent of U.S. new-vehicle volume in the first quarter, Experian Automotive said in a report released June 1.
That was 1.1 percentage points higher than a year ago and the fourth time in the past five quarters that lease penetration topped 25 percent. The previous record was 25.6 percent, set in both the first and second quarters of 2014.
Counting only new vehicles that were financed -- that is, excluding cash sales -- leasing accounted for a record 31.4 percent of U.S. volume in the first quarter, up from 30.2 percent a year earlier, Experian said.
Automakers love leasing and promote leases through their captive finance companies, for several reasons:
- Lease customers are more loyal, coming back more often to the same brand for a new vehicle.
- A subvented lease is less apparent to a consumer and therefore less damaging to a brand's image than cash on the hood or some other form of incentive. Lease incentives also have less effect on used-car values.
- Leases also partly offset the trend toward longer and longer loans, which keep consumers out of the market longer.
In the first quarter, the average U.S. new-vehicle loan term topped five years for the first time since Experian began tracking the data, at 67 months. In addition, 29.5 percent of U.S. new-vehicle loans were for 73 to 84 months, Experian said.
For their part, lease customers like the lower monthly payments that leases allow, and the chance to get into a new car more often.
Analysts say their crystal balls show leasing getting higher than it is now, but not a whole lot higher.
"It's reasonable to assume further increases in lease mix next year," said Thomas King, vice president of the Power Information Network at J.D. Power and Associates. The research and consulting firm doesn't forecast a specific number for lease share.
Eric Lyman, vice president of industry insights for ALG Inc., which produces a widely used industry benchmark for residual values, wrote in an email: "We are projecting lease penetration to stay at these current historically high levels for the mid- to long-term future."
King pointed out that a big increase in returning lease customers cuts both ways.