Consumer new car buying trends have shifted more toward leasing in the last eight years. That’s the finding of a report just out from Experian Automotive, which points out that leasing has grown 76 percent compared to financing as an option for new vehicles since 2008.
In addition to the tremendous surge in leasing, Experian also said that there’s a huge surplus of vehicles coming off lease: more than 1.8 million vehicles are set to come off lease by the end of this year (April through December, 2016).
Experian released the report during the annual National Automobile Dealers Association (NADA) conference in Las Vegas.
Vehicles Coming Off Lease
Some 28 percent of all leased vehicles that are coming back into the market include compact and midsize sedans and small crossover SUVs.
Specific makes and models include:
- Nissan Altima
- Honda CR-V
Consumer Vehicle Choices Shifting
Meanwhile, Experian notes that consumers’ choice of new vehicles to lease is shifting from fuel-efficient hybrids to full-size pickups, SUVs and crossovers. New leases of full-size pickups and entry-level sport utility vehicles show growth of 56 percent and 79 percent, respectively.
The report also notes that the volume of on-lease vs. off-lease luxury vehicles and alternative-power and hybrid vehicles has declined by 28 percent and 50 percent, respectively.
Melinda Zabritski, Experian’s senior director of automotive finance, said that consumers are scrutinizing their options. “As vehicle prices have been on the rise, we have seen consumers using several tactics to keep their payments more manageable,” said Zabritski.
Drawn to leasing these more expensive and less fuel-efficient vehicles by low gas prices and attractive low monthly lease payments, consumers see no immediate downside.
But what happens in three years or so when these leases are set to expire? What will be the price of gas then? How will that impact the glut of off-lease vehicles dealers will need to move? If, for example, gas prices skyrocket, dealers may have to resort to drastic price cuts to clear the off-lease inventory. Consumers, on the other hand, are likely to revert to more fuel-efficient vehicles, including hybrids, plug-in hybrids and even electric cars.
Three Markets with Greatest Off-Lease Volume
According to the report, the top three demographic market areas with the greatest volume of off-lease vehicles are two coastal cities and one in the Midwest: New York, Los Angeles and Detroit.