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.
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.