High vehicle prices are driving interest in used-car leasing, an idea that was previously overlooked, according to Wards Automotive.
The risks associated with used-car leasing were a major concern in the past. The main pain point was forecasting the worth of a used vehicle many years down the line, according to Wards.
But advanced predictive analytics and the current state of the market, characterized by high demand and low supply, are making leasing pre-owned vehicles a more attractive option, Wards reported.
Rusty West, CEO of MarketScan, told Wards he sees such leasing as a means of easing consumer pain and reducing auto lending risk. A sellers’ market, he says, has consumers paying premium prices on new and used vehicles. Higher interest rates are also contributing to sky-high loan payments.
Nearly 40% of auto deliveries in the early 2000s comprised leased vehicles. Cox Automotive reports that that has dropped to under 20% today. Captive lending companies stopped offering sweetheart lease deals, incentives and rebates because vehicles were moving without them, according to the article.
But West predicts a leasing comeback in today's automotive retail climate. He says leasing:
- Helps consumers avoid long-term, high-interest loans with monthly payments pushing $1,000 on purchased high-priced vehicles
- Reduces lenders' risk of borrowers defaulting on high-interest, longer-term loans
- Ensures repeat business for dealerships because customers return to their stores when the two- or three-year lease expires