Automakers and their captive finance companies are carefully steering incentive money to low-interest loans instead of cut-rate leases, even if the change in marketing strategy makes lease originations fall. At the same time, they're watching to see whether anyone blinks, analysts say.
"It really comes down to what the collective industry does," Eric Lyman, vice president of industry insights at TrueCar, told Automotive News. The notion of a standoff has always existed, he said. "The automakers are very keen competitors, and nobody wants to be the first to pull back from a marketing strategy in a way that causes them to lose share."
Lease penetration of U.S. retail volume was 30 percent this year through July, down from 31 percent in the same period in 2016. It was the first time leasing failed to beat the prior period since the recession, said Larry Dixon, senior director of J.D. Power Valuation Services. At the same time, he said, the numbers show interest-rate incentives are rising faster than lease incentives.
"We are seeing APR incentives in our data are up," he said, referring to annual percentage rate. "That's versus lease incentives, which are also up, just not as much."
Without disclosing per-unit numbers, Dixon said that, on average, overall incentives were up about 5 percent through July. Within that total, APR incentives were up 15 percent. "So there's a reallocation, if you will," he said.