The car market is undergoing rapid change at the moment, with a variety of factors influencing customer trends. One of the latest shifts is in regard to leasing, with fewer and fewer new car shoppers opting to lease.
According to a recent report from Kelley Blue Book, fewer than 19 percent of new buyers are choosing to lease. By comparison, almost a third of new car shoppers chose to lease prior to the COVID-19 pandemic, with Kelley Blue Book parent company Cox Automotive indicating that leasing hit a modern peak of 34 percent of the new car market in February of the 2019 calendar year.
It’s expected that the percentage of new car shoppers who choose to lease will decrease even further by the end of this year. Per Cox Automotive economist Charlie Chesbrough, the decline in vehicle leasing can be attributed to three factors, starting with higher overall vehicle prices. As vehicle prices rise, lease payments have risen as well, with the average lease payment now as high as the average loan payment in 2020. As a result, some buyers have simply been priced out of the market.
Another potential factor is that more lessees are opting to buy their vehicle at the end of the lease, with rising vehicle prices resulting in some vehicles being worth more than the price to purchase at the end of the lease period.
Finally, with new car demand well above available supply, automakers and dealers are simply not offering attractive lease terms.
Looking ahead, Chesbrough anticipates fewer leasing deals could have an effect on the number of buyers who can afford a new vehicle, especially in conjunction with rising prices and interest rates. Additionally, fewer leased vehicles entering the used market will likely have an impact on those customers seeking a certified pre-owned vehicle, and will likely result in elevated used vehicle prices despite a potential slowdown in demand resulting from rising interest rates.