Auto Service World
News   April 12, 2016   by Steve Pawlett

Car Leasing Is Increasing To The Benefit Of  Used Car Shoppers


New car sales rates have increased 68% — from 10.4 million in 2009 to 17.5 million in 2015 — since the recession, leading more people to lease instead of buy. The rate of people leasing cars rose 26% year-over-year from 2012 to 2013, according to the 2015 Used Vehicle Market Report.

Since most leasing agreements are for three years, that has created a glut of vehicles in today’s used car market. As a result, prices for used cars have dropped, with prices for 3-year-old vehicles discounted by about 4% year-over-year in 2015, according to the report.

This trend is still in its early stages — the number of lease deals was at its highest level ever in 2015, according to car auction company Manheim’s 2016 Used Car Market Report, meaning off-lease levels will remain high at least through 2018 — so customers will be able to enjoy lower used vehicle prices as long as monthly lease payments remain attractive, says Larry Dixon, senior analyst for the National Automobile Dealers Association’s Used Car Guide. “It’s the first time since the recession that [used vehicle] prices have come down,” Dixon says, citing high vehicle supply as the primary driver of low prices.

The popularity of leasing picked up in 2010 after dropping to a low of just over one million deals in 2009, according to Manheim. The number of deals have increased steadily each year, reaching just under four million in 2015.

When a new car is leased, it is owned by a finance company — typically one under the ownership of the auto maker — which determines the monthly payments based on the expected value of the car after the lease is up.

The pickup in leasing has been attributed to a combination of low interest rates and new cars maintaining their value through the leasing term, says Tim Fleming, an analyst at Kelley Blue Book. These factors have made it easier for dealers to offer lower monthly leasing payments, making it more attractive to lease than buy.

The average monthly lease payment offered in February was $425, compared with the average car payment for that month, which was $542, according to data from J.D. Power.


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