Leasing as a percentage of new-vehicle sales soared in the years after the recession, hitting a record 31% in 2016, according to car-shopping firm Edmunds.com. As of October, lease rates are at the 2016 level, although the number dropped last year.
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Leasing gained momentum again after the recession. Auto makers, taking advantage of low interest rates and strong used-car values to offer attractive deals, expanded leasing to a range of models, including pickup trucks and small cars. As a result, vehicles remained affordable even as car companies loaded more technology in them, increasing sticker prices.
Auto makers now say it is getting more expensive to offer deals because higher interest rates are pushing up borrowing costs for their in-house lenders.
Companies are also projecting that used-vehicle prices will decline in coming years because of a flood of lease returns hitting the market, while customers’ rapid shift to sport-utility vehicles and trucks will depress sedan prices. The expectation that cars will therefore be worth less at the lease’s conclusion is pushing companies to set payments higher, dealers and analysts say.
On some sought-after models, customers are seeing even steeper payment increases because the cars are harder to find or were redesigned recently, dealers and analysts say. Now, many once-loyal lease customers are looking at other options, including shopping rival brands for better deals or moving to a used car, they say.
Matt LaPlant, a 37-year-old record producer in Madison, Wis., felt he had scored a deal when he leased a new Toyota Prius three years ago, paying $250 a month for a nearly fully loaded model with leather seats.
He was hoping to get a similar payment on his next Toyota Prius lease, but the salesperson told him that wasn’t possible. For $250 a month, the best the dealership could offer him was base-model Corolla—a much cheaper car than the Prius, he said.
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Ps note how even the reporter uses the term “fully-loaded” Prius lol
So now we are going to lease at 1.2% instead of 1%. Big deal. I have been leasing for more than 20 years now and it is impossible to get a 1% lease before because mf is high and rv is low. We are just going back to that level. Everyone got spoiled to the 1% or less unicorn lease. The only thing that will stop a lease is if the monthly finance payment would equal monthly lease.
it wasn’t me personally, was a family member and no i don’t remember the details of RV etc. but i remember it was sub 1% and it was only BMW that was such a value because you could do 10 MSDs.
I remember in the 80s when Porsche 911s were lease bargains vs their MSRP. Now Porsche has MFs over 0.00200 on everything except their volume Caymens and Macans.
@Bjam - there’s no rule that covers everything. There are leases out there with virtually zero MFs and the same manufacturers don’t have APRs that are similar. There are leases with more dealer incentives than on purchases. If you understand leasing, the pros and cons, you seek out the deal that make sense. Sometimes leases are better deals because the manufacturers want you coming back for another one in 3 years, or maybe earlier with a pull ahead.
Used car prices often do go down with lease returns flooding the market. Same thing with values on cars that are the same as rental cars. Manufacturers are starting to fight this by forcing dealers to pay too much for lease returns.
And conversely, Prius’ tank when gas prices are low for a while.
High RV and low MF were the perfect storm for leasing. These factors have now inverted, particularly for sedans,
Certainly these factors also impact new car loans but for now it seems the smart money is going to be towards buying (in cash if possible), good 2-3 year old used cars …
Of course if you like the new car smell and must have the latest model, then you are trapped into the leasing cycle, even when it may not make lots of financial sense.
Are there treatment facilities for new car smell addiction? I’m pretty sure I have that.
It’s going to be interesting to see what happens when/if gas prices inevitably spike again too. I just can’t see a situation where people give up their SUV/CUV anytime soon. It’ll be tricky to go back to an Accord after driving a CRV or a Pilot for example, especially given the MPG trade off isn’t huge. I would imagine that EV and PHEV SUV’s would be the winners in that race.
First, you been in a 2018 Accord touring? Way better than CRV in most ways except for ride height. I’d be considering a CRV if it offered all the same features. CRV also considerably smaller. Doesn’t lease well but I’m getting close to buying one. Much cheaper than CRV since sedans are so unpopular. Pilot is nicer more comfortable vehicle, especially in higher trims. Going from pilot to Accord would be a downgrade in most respects.
As for gas prices, I used to agree with you but now I don’t know. Gas prices are way up over their historical inflation adjusted long term average (link below). I think the new normal is about 3 bucks a gallon for regular. Would need the five dollar gallons to really shock the system.
My prediction is if gas prices went way up manufacturers would start by putting smaller engines in bigger cars - see European suv models. Honda pilot doesn’t need 280hp to exist. Make it a 200hp engine and you get significantly improved mileage and keep the big vehicle at the cost of performance.
I scored a 2011 base 328i right at 1% zero DAS in NY it was a December blow it out 27mo deal on a rwd car. No special incentives were added to this one it was my first hackr worthy lease. Followed that up with 1% on a 335xi with return lease and USAA incentives again zero DAS end of December deal. No MSDs in either deal. I miss those programs and driving those cars. The 328 was a joy to drive slow and not so great on gas but that silky inline 6 and manual trans was a great combo.
