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Customer LoginsAutomotive leasing moves beyond the luxury market
Leasing is not just back; it has climbed to new heights in the US car business. Through the first seven months of 2013, leases have accounted for 20% of all new vehicle transactions, the highest annual lease penetration in at least 10 years if it holds for the rest of the year. The Fed's bond-buying program, which has suppressed interest rates, coupled with the higher quality and residuals of new vehicles, has helped to make leasing more attractive to the consumer.
This industry-wide rise in leasing has been well-publicized, but the trends underneath the top line, some of which are counter-intuitive, have not gotten as much exposure. Leasing traditionally has been a tool used by luxury makes to attract customers, via low monthly and down payments, who otherwise would not be able to afford a luxury vehicle. Recently though, leasing increasingly has been adopted by non-luxury marques. As shown below, leasing now comprises more than 17% of all non-luxury transactions, the highest level in at least 10 years and almost four percentage points above the recent peak of 13.2% in 2007.
One reason for the expansion of leasing to the non-luxury space is the Asians', and in particular the Koreans', interest in leasing. Of Hyundai's 2013 registrations through June, 20% are leases, up from 10% three years ago. Similarly, Kia's lease penetration has jumped from 6% three years ago to 19% now. Nissan, Mitsubishi, Mazda and Toyota are now all leasing vehicles at the highest rate in three years as well. So far in 2013, 21% of all Asian new vehicle transactions have been leases, the highest in at least 10 years. It is probably not coincidental that the Asians have moved into leasing at the same time that they are facing increased competitive pressure from rejuvenated domestic makes and a more aggressive Volkswagen. Hyundai and Kia are also experiencing a lull in product activity until next year.
Subaru, the Asian make which has enjoyed the most sales success in the past few years (and the only make with seven consecutive years of year-over-year sales increases), has moved away from leasing. Subaru's 2013 lease penetration stands at 11.3%, lowest among the non-luxury Asian makes. This makes sense, as Subaru is facing inventory shortages amid unexpected demand for several core products and, therefore, has little need of sales and marketing tools such as leasing.
Tom Libby is manager, loyalty practice and industry analysis, IHS Automotive
Posted 8 October 2013