The dealers preferred leasing vehicles as a way to improve margins and customer loyalty in the US. About one-third of Americans used leasing as an option to drive a vehicle. However, the trend has changed since the outbreak of coronavirus. The lack of affordable leasing options and reduced inventories at dealerships are pushing Americans to buy new vehicles.
According to the latest BNN breaking news, it could take several years for the inventory to pick up to the pre-pandemic levels. Automakers generate handsome money by selling new vehicles compared to leasing cars. Lack of inventory has increased the lease prices making the leasing option unattractive for Americans.
Chips shortage for vehicles
The automakers also claimed a shortage of computer ships for reduced inventories. As a result, the dealers maintained thin stocks. According to the data available from Experian, the lease payment increased to $567 in Q3 2022, an increase of 25% compared to the same period two years ago.
According to executives and dealers, the difference between the cost of financing a new car and the monthly payment cost for a leased car has shrunk significantly. The Honda HR-V small SUV’s lease payment in November 2022 was about $374, which is just $100 less of a financing cost. GM of Kalamazoo, Ryan DeNooyer said the prices for buying or leasing a car are pretty similar.
The lease of vehicles declined from 45% in the pre-pandemic period to 20% in recent months. Inventories in the US are slowly surging. According to information available from Wards Intelligence, a research firm, the inventories of cars at dealers in the US stood at 1.7 million by the end of 2022. It is an increase of 49% compared to the previous year. However, it is still at half of the level compared to the pre-pandemic period.
Chase Auto’s Chief Executive, Peter Muriungi said the automakers will need more time to rebuild their inventories to sweeten the lease terms. Chase Auto engages in the financing of vehicles manufactured by Rivian Automotive Inc., and Subaru Corp. There is no need for automakers to offer attractive lease terms.
Recession fears to sweeten leasing options
Reduced inventories and higher leasing costs of vehicles forced Americans to favor buying a new vehicle for their commuting needs. However, the trend is expected to change this year. According to information available from BNN News Network, recession fears, higher interest rates, and improved availability of cars expect to reduce the lease prices.
Paul Jacobson, the Finance Chief of General Motors, said the company favors leasing for its electric vehicles as it prepares to unveil several innovative EVs soon. Sonic Automotive’s President, Jeff Dyke, said the company will maintain a smaller inventory for the next few years. However, vehicle manufacturers expect to spend more to promote the leasing of vehicles. According to Mr. Dyke, it could take some more time to bring back the ecosystem, which was disturbed during the pandemic.
Dealers will get more revenue because of repeat business through lease options. They can utilize used cars to support their leasing business. The increased availability of computer chips and favorable financing options expect to increase the leasing business soon.
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