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Used-Car Leasing Gets a Fresh Look

Dealers and lenders renew their interest in the once-overlooked practice of used car leasing.

August 14, 2023
Used-Car Leasing Gets a Fresh Look

Leasing helps consumers avoid long-term loans with big monthly payments, reduces lender risk, and ensures repeat business for dealerships.

IMAGE: Pexels

2 min to read


 

High vehicle prices are driving interest in used-car leasing, an idea that was previously overlooked, according to Wards Automotive.

The risks associated with used-car leasing were a major concern in the past. The main pain point was forecasting the worth of a used vehicle many years down the line, according to Wards.

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But advanced predictive analytics and the current state of the market, characterized by high demand and low supply, are making leasing pre-owned vehicles a more attractive option, Wards reported.

Rusty West, CEO of MarketScan, told Wards he sees such leasing as a means of easing consumer pain and reducing auto lending risk. A sellers’ market, he says, has consumers paying premium prices on new and used vehicles. Higher interest rates are also contributing to sky-high loan payments.

Nearly 40% of auto deliveries in the early 2000s comprised leased vehicles. Cox Automotive reports that that has dropped to under 20% today. Captive lending companies stopped offering sweetheart lease deals, incentives and rebates because vehicles were moving without them, according to the article.

But West predicts a leasing comeback in today's automotive retail climate. He says leasing:

  • Helps consumers avoid long-term, high-interest loans with monthly payments pushing $1,000 on purchased high-priced vehicles

  • Reduces lenders' risk of borrowers defaulting on high-interest, longer-term loans

  • Ensures repeat business for dealerships because customers return to their stores when the two- or three-year lease expires

Originally posted on Auto Dealer Today

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