Leasing trend moves to used vehicles
Leasing continued its upward trend in the second quarter, again reaching all-time-high penetration levels, and used-vehicle leasing is growing with it, according to Experian Automotive’s Q2 2016 State of the Automotive Finance Market report.
New-vehicle leases made up 31 percent of the market in the second quarter, up from 27 percent a year earlier.
Used-vehicle leasing accounts for a small piece of the lease market in comparison, but it grew to 3.7 percent, compared with 3.3 percent a year earlier.
By volume, though, used-vehicle leasing has made more remarkable strides. In the past two years, used-car lease volume has surged 43 percent, Melinda Zabritski, senior director of automotive finance for Experian Automotive, told Automotive News. The past few quarters, used lease volume has averaged around 40,000 vehicles, but two years ago, it was around 30,000.
“It’s still a relatively small number, but I would anticipate that growing,” Zabritski said, especially as new-vehicle leasing has climbed over the past few years and there is an expanding inventory of used vehicles.
There has been a lot of buzz about used-vehicle leasing since Ally Financial, Toyota Financial Services and BMW Financial Services began encouraging used and certified pre-owned leasing earlier this year.
“We are also hearing some noise in some of the other lenders on used leasing,” Zabritski said. “With new leasing being as high as it is and growing as much as it has over the past few years, folks are getting into used leasing to help deal with this inventory of late-model used vehicles.”
Over the past several years, used leasing was uncommon because most dealers had low used-vehicle inventory. Now, with new-vehicle lease returns, used leasing’s share of the total lease market is slight, “but you have to think about how big leasing has become,” Zabritski said.
It’s not just used-vehicle leasing, though. More customers with excellent credit purchased used vehicles in the second quarter. Of consumers in the superprime risk tier (defined as credit scores of 781 to 850), 43.3 percent financed a used vehicle in the second quarter, a 10 percent jump over the year-earlier period. For prime consumers (with scores of 661 to 780), 59.9 percent chose a used vehicle, a 6.6 percent rise.
Affordability is a main driver, Zabritski said. “They are financing quite a bit less. The monthly payment goes from $470 to $500 down to $370. They are saving well over $100 buying a used vehicle.”
Zabritski expects that prime and superprime customers will continue to buy used vehicles. But she also expects manufacturers to offer attractive incentives to keep new-vehicle sales strong.
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