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More than 1.8 million vehicles will come off lease by the end of 2016 in the U.S. making it a good time for dealers to capitalize on the trend, according to Experian Automotive.
The information services company presented new analysis on vehicle leasing and other auto finance trends in the U.S. at a press conference at the 2016 National Automobile Dealers Association (NADA) Convention & Expo in Las Vegas, Nev.
Melinda Zabritski, senior director of Automotive Finance and Erik Hjermstad, senior automotive market analyst for Experian, looked into some of the shifts happening in leasing in the U.S., including financing and other changes in consumer preferences.
“It’s been the year of the lease and we don’t see that going away any time soon,” says Zabritski.
In the U.S., leasing is at its highest rate in 10 years, up 50 per cent since 2010. More consumers are attracted to the lower monthly payments on leases, even though monthly lease payments have gone up slightly from last year, says Zabritski.
The Honda Civic, Accord and Toyota Camry are the top three vehicles leased in the U.S., though Hjermstad notes that the pickup and SUV segments have picked up due to low prices at the pump.
With 56 per cent more full-sized pickups in the leasing market today, Hjermstad anticipates real opportunity in that segment in two to three years.
Zabritski also sees the prime segment increasingly moving into leasing, as 33 per cent are choosing leasing over loans now, up 24 per cent from 2014. While there is not as much leasing in subprime, Zabritski is noticing a change.
Melinda Zabritski, senior director of Automotive Finance, Experian
Leasing also drives loyalty more than anything else, as dealers know exactly when consumers will come back to get a new vehicle.
Experian found 71.5 per cent of people coming out of lease are loyal to their brand, even with luxury brands such as Mercedes-Benz and Lexus. As a comparison, only 60.6 per cent brand loyalty on the loan side.
But with record car sales and a strong leasing market, dealers need to figure out how they can grow, says Hjermstad.
Experian identified areas of opportunities for dealers to capture new buyers in the leasing market, in particular those with graduate degrees, in management roles, and with household incomes greater than $200,000.
Recent Experian data revealed that graduate degree holders have the highest lease rate at 33 per cent — but the lowest loyalty. Managers who lease vehicles were found to be nine per cent less loyal, and “that’s a large number,” says Hjermstad.
Household income was the strongest trend, says Hjermstad. As income moves above $200,000, leasing rates drop 17 per cent than those making $100,000 or less.
Other auto finance trends highlighted during the Experian presentation included:
- An increasing reliance on lenders, as 86 per cent of all cars in the U.S. have loans or are being leased;
- A shift towards 84 month loan terms, with millennials in particular embracing longer loans;
- Improved credit quality on the used car side; and
- A slight increase in auto loan delinquencies past 60 days, from 0.67 per cent in 2014 to 0.71 per cent in 2015. Millennial delinquency is higher than the average at 1.07 per cent.
