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.
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Comments
I used to lease, but I found myself always watching the miles, trying not to go over the miles without paying extra mileage fees. The 10,000 miles allowance does not allow you to use the auto as you wish to. I bought up to 15,000 miles but I still had to monitor my driving. This is a high payment not to be able to drive freely.
Leasing has never been a good idea financially, purchasing has always been cheaper in the long run.
Complete falsehood. There is little economic difference between the 2. The most important difference is at the end of the lease you have a fixed price put option ( ie guaranteed trade in price) from the lessor. Most people state your conclusion simply because it is an old wives tale and may have been true with open ended leases once upon a time. In recent pre Covid times massive incentives were available in leases but for an outright purchase making leasing far cheaper.
Can’t honestly compare today’s car market. Ask Dave Ramsey America’s foremost financial guru, he has run the comparison over and over and purchase always comes out on top. Do you really believe that the dealer would let you drive out the premium warranty covered miles without paying for that? LOL.
He is simply wrong. There is no substaintial difference in cost. In both cases you are buying the vehicle and paying for the economic depreciation plus inrerest. What i suspect he is really comparing is owning a vehicle til its death vs a new one every 3 or 4 years-that is not a lease/buy analysis but an apples to oranges comparison. Because there is greater depreciation in earlier years of ownership, it is cheaper to hold cars longer…but that has nothing to do with leasing. It is a decision around one’s willingness to have their spouse or child breakdown at midnight somewhere vs the reliability of newer vehicle. The other consideration is many people lease a more expensive car than they can afford since they buy the monthly payment. ( i can only afford to buy a Civic but i can lease an Accord-no no no, bad financial decision).The only incremental cost is the lease fee which is usually inconsequential which buys you a guaranteed trade in value, often access to manufacturer incentives only available on leases and the opportunity cost to invest spread because you are borrowing the full value of the vehicle and keeping your cash. I personally lease or buy based on the deal available and available investment oppties.. My current car had an incremental 5k incentive only available if i leased which i did and purchased the vehicle at lease end and pocketed 60 pct of the 5k. Each situation and person is different but if you buy a 50k car it costs 50k plus interest and oppty costs on cash at acquistion. Depreciation is the same under a lease vs buy for any ownership period but as noted above with a lease you know the trade in value (residual) and have no future market risk in negotiating a sale or trade in-flip them the keys and on to the next car. I will concede this-negotiating leases is not for the faint of heart nor for the uninformed. My advice is simply analyze the deals being offered- either buy or lease by implied component eg money factor, depreciation, investment return estimates etc. Best.
Leasing is good for those who trade every 3 years. Because with most cars/SUVs, the residual
will be higher than the trade in value. Obviously buy and hold long will be cheaper overall,
so how you use vehicles will decide what could be better.
After CV, it’s a harder decision to decide what is better.
If the day comes that gas vehicles become almost worthless, that will be a good time to have had a lease.
Agreed as long as you realize you are paying for that convenience.
Carl you are not simply paying for convenience. Rather you have made a decision to never purchase an extended warranty, to not strand a family member at night and to not be at the whim of an aging vehicle. You are also purchasing much safer vehicles over time- hard to value that one. The method of financing (lease or buy) has nothing to do with the choice of owning a vehicle until end of life. Yes it generally costs more to upgrade a vehicle every 3 to 5 years (but not as much as you might think). For some the gains are well worth the cost, for others they are just fine with a less reliable/predictable and less safe vehicle. And many unfortunately don’t actually have a choice-they are simply grateful to have functional transportation.
if it floats, flys or f*cks, lease it!