NEW ORLEANS -- In spring 2016, the idea of used leasing buzzed around the National Automobile Dealers Association convention and the American Financial Services Association Vehicle Finance Conference in Las Vegas. Nearly a year later, used leasing is still only a sliver of the market. Used-vehicle lease payments are too close to those for new vehicles to make them appealing, and many lenders are unsure of how to set the residual values on used leases, experts said here last month at the associations' 2017 events in New Orleans.
Last year, Ally Financial, BMW of North America and Toyota Motor Sales U.S.A., along with captive Toyota Financial Services, encouraged used and certified leasing to prepare for the glut of lease returns.
Ally still has its program, Tim Russi, president of auto finance, told Automotive News on the sidelines of the NADA convention last month, but "used leasing currently doesn't work very well." The payment gap between new leases and used leases is too small because of high incentive levels on new vehicles, he said. "As prices drop on used cars and if incentives stay at the level they are, maybe even retreat, the payment differential will gap out," Russi said. "We think that long term [it] could be a viable product when the right dynamics are there."
At the J.D. Power Automotive Summit here last month, Steve Hill, General Motors' North America vice president, said that automakers typically have a fixed pool of money for incentives. On used cars, "we know roughly how many aggregate used cars are out there. We don't know by vintage, by mileage, all of that," he said.