The leasing slump is an industry-wide concern, especially for luxury car makers that rely on leasing businesses to make expensive metals affordable.
Edmunds data shows that luxury car leasing penetration plummeted to 26% in the fourth quarter of 2022, compared to 53% in the same quarter of 2019 pre-COVID.
Soaring interest rates have made leasing less attractive than buying. According to Edmunds, the annual average percentage of new loaned vehicles in the fourth quarter of 2022 rose to 6.5%, compared with 5.7% in the third quarter and 4.1% in the fourth quarter of the same period last year.
Sloane said customers are the purchasers of payments, so they are doing long-term financing.
“If the payments were $800 a month, a 60-month loan, and a lease of $780, people would buy the car,” he said. “I’m afraid the sales cycle is changing and three years from now he won’t have these customers signing up for new leases.”
Brian Finkelmeyer, senior director of new car solutions at Cox Automotive, attributes the sharp decline in the leasing market to a persistent shortage of microchips that is straining vehicle supply.
The resulting high prices and reduced incentives for factories are fueling the collapse of the leasing market. Leasing subsidy spending across the luxury segment is down about 70% from pre-pandemic, Cox said.
Finkelmeyer said leasing is the most expensive incentive offer because automakers need to set up reserves for future losses at auction due to depreciation. car news.
He said the lease was a “convenient lever” for moving metal when the dealer’s lot was full. But automakers can’t justify offering incentives in a low-day supply environment where dealers pre-sell vehicle quotas.