I find the perspective of this op-ed interesting, which goes against the mainstream thinking that leasing is going downhill due to the shift in supply and sales strategies as well as the rising interest rate. In particular, this argument piqued my interest:
Leasing’s biggest value to the industry is something that most consumers rarely think about: control. Leasing gives automakers, lenders and dealers the ability to entice their consumers to return to the dealership at a time largely of the lessor’s choosing. Consider that a lessor knows before any of its competitors when a lessee will return to the market for a new vehicle and as a result can target marketing resources very efficiently to get them back into another vehicle.
What are your thoughts on the leasing market moving forward?
It’s interesting to note that the US is the only market with a mature car leasing sector that I am aware of (happy to be corrected by our globetrotters out there!). If leasing plays such a crucial and beneficial role within auto sales, why isn’t the practice widely replicated else where in the world?
Just a plain ole consumer here, but I think the ‘old days’ won’t return until manufacturers/captives control the whack ADMs dealers are enjoying, and actual stock numbers return. It’s highly negative to run a Costco $1K off promo on a car no one can get, and to pay tv spots for ‘nationwide’ lease deals no dealer will make. I also find it odd there are the niche models that have so much meat left on the bone (not to complain, we enjoy that) that it shows unanticipated market dynamics by these ‘pros’ and the inability to make adjustments on the fly to help normalize the market. Many things have normalized in supply and cost since the pandemic, but not wheels.
You can lease a car here, but it’s very much a longer-term rental than a lease like in the USA. There are lease to own or a normal long term lease/rental through the first party dealers or rental companies, but it’s not in any way like the USA where ‘hacking’ is a possibility.
I am having a hard time finding data I can understand for Europe but what is the tax situation on leased cars? My guess would be it’s not as favorable as the most common American model of only paying taxes on the total lease payments (either monthly or upfront). For the UK, it seems like the tax rate might be normally 20% although I am not sure. If the tax rate on new cars is substantial, you would expect it to have a negative effect on leases.
It is neither difficult nor terribly expensive for manufacturers to target the largest swath of consumers of other brands based on lease-end date, and by the amount the consumer has historically spent.
The easiest way to do this would be to purchase marketing lists from one of the CRAs. I’ll use Experian in this example since I have a report handy.
Audi could simply utter, “Give me every BMWFS lessee with a payment between $750 and $1,000 with a lease maturing in X to Y months,” and Experian will barf out a list and sell it to them…
I have a question for the credit guru yourself. When a lender pulls a report, they see the monthly payment, and total balance correct.
So even though I have payment history for a 900/month+ ///M, if that lease was only 12 months they will see the 12 month total balance rather than the payment, or would they consider the payment as well when making future credit decisions.
I think you have two questions, one about reporting and the other about new loan/account underwriting. I can’t answer your underwriting question (“how will the data be used to decision / price my next loan/lease?”).
For reporting, the balance is the current balance. On a paid-off lease, the balance should be reporting as $0.
Your payment history will capture how many months you made payments, which months you made payments, and the amount of each payment.
Note that not every field that’s available for purchase from a CRA for commercial purposes is displayed on your personal credit report, which is sort of a diluted / dumbed down view for consumer consumption and for readability by human eyes.
(For actual underwriting purposes, a raw data file is purchased by the lender and these fields are mapped into a software application that does the decisioning, pricing, etc.).
[quote=“littleviolette, post:1, topic:418740, full:true”] It’s interesting to note that the US is the only market with a mature car leasing sector that I am aware of (happy to be corrected by our globetrotters out there!). If leasing plays such a crucial and beneficial role within auto sales, why isn’t the practice widely replicated else where in the world?
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The US is built around debt including people buying things they cannot afford, in the rest of the world people don’t have such a drive to live big and instead will buy used cars and keep them for long. You see even people coming on here don’t make a TCO analysis before leasing instead just want that new car
The UK has a fairly advanced leasing market - or rather PCP deals.
For some inexplicable reason Toyota saw fit to give a fairly stupid 19 year old me a PCP deal on a Toyota Aygo that probably single handedly saved my finances when I was at University. It was an ‘all in’ deal where I was paying £93 a month for literally everything including insurance at the time (which was and still is the biggest headache for young drivers) - It was just add petrol and go. Best financial decision I made at the time.
Lot more subscription services rather than leasing. Why be locked into a 3 year lease and have to pay for insurance/maintenance when you can pay a monthly or annual subscription fee and have access to a fleet of cars with insurance and no maintenance. Only hassle will be coordinating pick up/drop off but I assume the higher-end brands will have a concierge service. I don’t think this will take over the market, especially outside large cities, but don’t be surprised to see a chunk of people who traditionally lease switch over.
Disagree. This will be much higher cost for dealers and companies, think damages cleaning underwriting etc besides people have good insurance rates which will disappear if blanketed. Also higher cost then negotiated lease deals. It might be a market but will remain niche
Assuming they becomes available/allowed everywhere, which isn’t the case now.
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