Leasing Rates Improve in 2004
Vehicle leasing is making a comeback after it reached a low of 13 percent in 2003. Last year marked the end of a steady decline since leasing peaked in 1999 with 25 percent of vehicle deliveries.
Vehicle leasing is making a comeback after it reached a low of 13 percent in 2003. Last year marked the end of a steady decline since leasing peaked in 1999 with 25 percent of vehicle deliveries.
About 14.2 percent of vehicles were leased in 2004, and leasing is expected to increase to 16.5 percent in 2005 and more than 20 percent in a few years, reported WardsAuto.com.
Leasing will continue to become more attractive as interest rates go up and residual values stabilize, said Raj Sundaram, president of the Automotive Lease Guide.
Lease terms will not be as low as in the past, when leasing was offered to move more vehicles and build customer loyalty. Now, lease terms are based on more realistic predictions of what the vehicle will be worth when it is turned in.
A 15-20 percent lease rate for mainstream vehicles is about right, said Greg Smith, vice president of Ford Motor Co. to WardsAuto.com. For luxury vehicles, lease rates as high as 60 percent are possible.
In addition, leasing rates for SUVs reached a two-year high in November. This segment penetration was 23 percent — up 17 percent compared with November 2003, according to the Power Information Network.
SUV leasing penetration in the fourth quarter of 2004 has been 22 percent, which is up 10 percent compared with the year´s first quarter. The SUV leasing increase is more than three times the industry increase of 3 percent.
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