While leasing continues to drive new-vehicle sales, it’s growing at a slower rate than in recent years, and could decline this year, experts say.
Leasing will remain around 30 percent of the market for the foreseeable future, said Jessica Caldwell, director of pricing and industry analysis at Edmunds, but its growth in recent years is unprecedented. In 2009, leasing was only 16 percent of new-vehicle sales, Caldwell said.
Lease penetration fell 11 percent in February from a year earlier, Caldwell said. Last month, lease penetration -- leasing’s share of all new-vehicle sales -- was 29.7 percent, down from 33.2 percent in the year-earlier month.
Edmunds expects lease penetration to decline to 30 percent overall in 2017, from a record high 32 percent in 2016.
Leasing is “still a very high percentage of new-car sales but the residual values are starting to take hits,” Caldwell said. She added that it’s challenging to offer low lease payments when dealerships and lenders will be unable to sell the vehicle for as much when it comes back to the market.
“Consumers really like to lease,” as long as low monthly payments stick around, she said. But leasing has grown so much over the past few years that it “can’t continue at that pace.”
In the fourth quarter of 2016, leasing levels were flat at 28.9 percent, according to Experian’s latest “State of the Automotive Finance Market” report.
Melinda Zabritski, Experian’s senior director of automotive finance, expects leasing to hover around 28 or 29 percent this year, but said it could drop lower if there is a potential negative residual-value impact.
In the first quarter, she expects leasing to remain consistent with 2016’s fourth quarter. But year over year, leasing will likely decline in the first quarter, Zabritski said. In the first quarter of 2016, leasing reached 31 percent of new-vehicle sales.