Dealerships lease new vehicles at a greater pace than ever. It's a trend no one from finance to insurance to accessories can afford to ignore. Global information services company Experian revealed a record 31.46% new-car transactions come as leases. The Q2 mark eclipses the 30.22% reported in Q1. Average lease payments dropped in Q2 to $405, $7 less than the same quarter in 2014. Other data from the report gave shape to a movement of larger scope.
Car lessees’ credit scores dipped from 721 in Q1 2014 to 718 for the same period in 2015. This signals a softening in standards for leasing. Analysis also shows record highs for average loan length. Those rose to 67 months on new vehicles, 62 on used.
Data portrays a consumer who buys less often. This consumer also doesn't mind extended financing on a lease. They’ll stay in the car longer than before with relaxed standards for credit scores.Sublet terms and loan lengths protract the time between a customers’ return to the dealership for a trade in.
What’s to gain in the leasing game?
Consumers sometimes are better served with leasing than financing.
MORE CAR, LESS MONEY | A car loan covers the cost of the vehicle. Leasing applies to a percentage of it since the consumer won’t own the vehicle. What will the car be worth after the lease expires? It’s the difference between that figure and the sticker price at the time of lease.
LESS ON DOWN PAYMENT | Or, you can place a larger down payment, and lower monthly costs. Consumers don’t need much money to initiate the lease or purchase. They can find no-money-down offers on a lease. The tradeoff: You’ll pay a higher monthly rate.
LATEST TECH | Every three years, trade in your car for the latest model. Safety features also improve year-to-year. Typical bumper-to-bumper warranties last three years, too. When the term ends ends, trade in your car for one with the latest tech and safety features. And it comes with a fresh warrantee.
The dealership response
Dealerships have already detected the trends.
Generally, a lessee will return to the dealership after the term to finance another vehicle. Internet shopping has rendered them less of a sure shot to come back, though. Consumers research at home and set out in search of the deal they’ve found online.
Whether a customer buys or leases, a car can be customized to fit their needs.
Lessees must protect the investment as much or not more than a buyer would to avoid fees at the end of term. Yet, the car must feel as if it’s made for them. The more a dealer can build rapport, the more options emerge to sell accessories to fit this need.
Vehicle personalization still factors for lessees and buyers alike, especially for safety and protection. That's true, whether it’s for three years or for 30.