3.1 Million Leases Expected to End Next Year
You can expect about 3.1 million lease maturities in 2016, said J.D. Power’s John Humphrey, and that’s the year to watch closely.
That figure shared by Humphrey at the NADA/J.D. Power Automotive Forum in New York on Tuesday appears rather bulky next to the 2.2 million lease maturities in 2014 and the 2.3 million expected this year.
“Right now, we see used-vehicle prices remain relatively stable. They’re at pretty high levels,” Humphrey said. “But if we see an increase in the amount of vehicles coming off lease, that’s something we would want to watch. We want to see what happens with trade-in values and then the corollary with new-vehicle sales.”
Leasing, along with long-term financing, has hit record levels and allowed the industry a way to get more people into cars, Humphrey said.
Lease penetration has climbed from 13 percent in 2009 to 26 percent last year, according to Power Information Network data. Year-to-date in 2015, it’s at 28 percent, Humphrey said.
Leasing has also helped keep monthly payments stable, even amid rising new-vehicle prices, he added.
Of course, both leasing and long-term financing involve risks that must be watched, Humphrey said, including the possible flood of supply mentioned earlier.
Going back to Humphrey’s point on the 3.1 million leases expected to end next year, J.D. Power’s 2015 Automotive Outlook provided to the media at the forum says that figure could be particularly alarming for consumers in 72-month loans.
If such a consumer wanted to trade that car in and buy a new car, the report indicated, he or she would be faced with a residual value on the car that’s “significantly less” than the amount remaining on the loan.
That owner would then have to pick their poison: hold off on trading that car in, or trade it in at a much lower value, J.D. Power said.
“For the industry, the bigger concern is the increased cost of leasing if residuals decline,” the report states.
“Certified pre-owned vehicle plans have done well in mitigating downward pressure on used-vehicle residuals,” it continues. “However, the increase volume of lease maturities will require automakers to remain vigilant in managing their fleets.”