Yurchenko said the increase in car production is likely to be accompanied by a decline in consumer demand due to economic uncertainty.
The average new car loan launched in the fourth quarter of 2022 was $717 per month, up from $659 a year earlier, according to Edmunds. This is $130 per month more than the average lease for that period.
Some auto loan payments are once again nearing parity with mortgage and rent payments. In his final three months of 2022, 16% of borrowers agreed to pay $1,000 or more each month in vehicle loans, up from 11% the year before.
“Affordability is going to be an increasingly big issue,” Chesbrough said. Monthly payments are too high for the “majority of the population”.
Rising interest rates increase borrowing costs, but Danny Battaglia, managing director of ALG Customer Success at JD Power, said rising interest rates don’t necessarily spur leasing. However, an increase in interest rates increases the so-called monetary factor, the interest valuation of the lease. Automakers can lower their monthly lease payments by increasing the paper residual value, or projected value of the vehicle at the end of the lease, Battaglia said.
Automakers are rebuilding inventory levels at varying paces. Chesbrough said Detroit 3 is well positioned over Asian manufacturers, with some domestic brands his models back at his 2019 inventory levels.
Chesbrough said some automakers will need to offer lower prices to their customers to meet their internal sales targets this year. A lease can help.
“There may be pressure to be a little more aggressive. [on leasing] For the Detroit 3,” he said.
But all automakers face pressure to lower the cost of their cars for consumers, Chesbrough added. The big question is, can you keep your market share while keeping your prices high and your discounts low? And if Ford, General Motors, and Stellatis cut prices, will Asian brands with low inventories be able to hold out?
Chesbrough said Honda is losing market share and may discount leasing to regain it, while other Asian brands may continue leasing with tighter reach.
Black Book expects leasing growth “across the board” in 2023, Yurchenko said.
Jasmin Figueroa, finance chief at Hyundai headquarters, which is part of a Florida group that has stores for Mazda, Toyota and Honda, sees a recovery in inventory sufficient to support many of this year’s lease deals. said no.
“Inventory is increasing at all manufacturers,” Figueroa said. “But I think it’s still not enough.”