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Customer LoginsLeasing benefits brands and their retail networks
Industry-wide retail lease penetration reached 31.4% in Q1 2016 and 30.1% in April, the only times this metric has reached the 30% threshold in the past five years (see chart below). One theory for this rise is that brands and captive finance sources are utilizing leasing as a tool to prop up retail demand as actual natural demand wanes after six straight years of industry growth.
Regardless of whether or not this theory is valid, leasing provides some indisputable advantages for new vehicle brands and their retail networks. April 2016 CYTD industry-wide make loyalty (of those who returned to market, the percent who acquired the same make) for those households who originally leased a new vehicle was 63.6%, almost fifteen percentage points above the same metric for those households who originally purchased their new vehicle. In addition, those households who originally leased their new vehicle returned to the market after 29 months, sixteen months sooner than the households who originally purchased. These trends have been consistent going back to at least 2010.
Retailers also benefit from the popularity of leasing. Of those households who returned to market in the first four months of 2016 after leasing their original vehicle, more than half acquired their second vehicle from the same dealer, while only about a quarter did so if they purchased their original vehicle, a swing of almost 30 percentage points. And, as with the make-level data mentioned above, lessees return to the dealer much more quickly (almost two years more quickly) than purchasers. Over the long term, the shorter turn cycle for lessees will provide greater volumes for both the brands and their retail networks.
Tom Libby is Manager, Loyalty Solutions and Industry Analysis, IHS Automotive
Posted 14 July 2016