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Edmunds: Surge in Leasing Creating Market Shift

July 16, 2013

SANTA MONICA, Calif. — Based on Polk vehicle registration data, Edmunds.com reported this week that new-vehicle sales were outpacing last year’s totals through May. The reason is the surge in leasing, which is on track to smash last year’s record penetration rate of 22 percent.

According to the vehicle information site’s analysis, new cars accounted for about 29 percent of all sales through May. That puts the year on pace to top last year’s rate of 27.6 percent, which was the highest penetration of new cars in at least five years. Driving those totals is leasing, which accounted for a record 25 percent of new cars sold.

“Lease offers have become more important to automakers’ and dealers’ sales strategies,” says Edmunds.com Sr. Analyst Jessica Caldwell. “Luxury brands have for a long time relied on leasing to maximize their sales volumes. Now mainstream brands are riding that wave, drawing buyers with the promise of lower monthly payments through leasing.”

Caldwell added that while a monthly lease payment is often less than the monthly payment, the transaction type could be problematic for drivers who keep their vehicle for six years or more. She adds that purchasing a used car can general works out to be less expensive than either leasing or buying a new car.

“If drivers hope to have a couple years free of car payments and they want a vehicle they can sell or offer as a trade-in someday, then leasing is clearly not for them,” Edmunds states in its report. “They never own the car, so they can't do with it as they please.”

But Edmunds.com did note the benefits of leasing, saying a leased car can hold its value especially well, “making its residual price a bargain to pay in order to take home the car at the end of the lease.” In some cases, the vehicle information site added, lessees can leverage equity that they've built up in a leased car. They can also o enjoy a tax benefit if they use the leased car for work.

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