WESTLAKE VILLAGE, Calif. -

Though down more than 3 percentage points from an “exceptionally high” year-ago period, lease penetration rates remained steady in the near-20-percent range during February, thanks to relative stability in lease return volume and consistent incentives, according to J.D. Power and Associates.

And while the fallout from the 2008 leasing drought influenced the market in February, this shouldn’t pose too much of a problem for the leasing business going forward, J.D. Power’s Thomas King told Auto Remarketing this week.

Overall, lease penetration was at 20.3 percent in February, down from 23.6 percent in February 2011 but up from the 19.8-percent rate in January. A lease mix data chart from J.D. Power shows penetration rates remaining in the neighborhood of 20 percent since early last spring.

King emphasized that the “lease mix has been stable,” even though rates are softer than historical levels.

“It reflects consistency in the type of incentive offers available to consumers, coupled with a stable volume of lease returns,” he explained.

“February 2011 had an exceptionally high lease penetration due to several factors, mostly notably a combination of lease pull-ahead and lease specific incentives,” King added.

“It is fairer to evaluate February 2012 in the context of recent lease penetration, which has been stable,” he noted. “It’s also worth noting that since February, the industry has dealing with fewer returning lessees, since it is approximately three years since industry lease penetration dropped due to the financial crisis.”

However, this isn’t likely to be a persistent problem, King emphasized. In other words, “things won’t get tougher,” King stressed.

“We’re actually in a window of relatively stable lease returns, just at a lower volume than in the past. So no, things won’t get tougher,” he explained.

“The reason is simply that the cause of the reduced off lease supply (lower industry sales, large reduction in lease mix) happened quite quickly, so the transition to lower return volumes has also happened quite quickly,” King continued. “Eventually we’ll see more returns following the recovery in lease mix and industry sales.”

Looking at some other trends that influenced the leasing market in February, King pointed out that the market share for 72-month financing has set records. In February, the penetration level for 72-month loans was 28.5 percent, up from 27.8 percent in January.

He explained that given the fact that 72-month financing deals typically provide for lower monthly payments, it can be a “viable alternative to leasing.”

What’s more, he emphasized that the overall retail side of the market climbed 13 percent year-over-year in February, “so although lease mix is down, the actual volume of leases was somewhat similar.”

Segment Trends

Breaking it down by segment, most vehicle categories increased penetration rates from January, but only midsize utility vehicles were up from February 2011.

Leasing share for this segment climbed from 25 percent to 28 percent. And since calendar-year 2009, the penetration rate has climbed all the way from 11 percent.

“Increase in leasing for midsize utilities versus 2009 reflects the impact of domestic manufacturers re-entering the lease market, plus redesigns of several vehicles that resulted in significantly improved residual values, and therefore the ability to offer competitive lease payments while maintaining incentive spending discipline,” King explained.

As for this segment being the only one to increase year-over-year, King said, “The monthly variations reflect changes in OEM incentive offers that favored leasing in the mid-utility segment.”

He added: “That being said, the variations across the segments are relatively modest in percentage point terms; we show the percentage change in the document which tends to make even small absolute changes look large.”

King went on to point out that with higher gas prices, fuel-efficient segments saw an uptick in leasing demand, which is expected.

“For example, large pickup share of industry was down to 10 percent in February,” he noted.

Looking at the leasing penetration rates in more details, compact conventional models were at 19 percent in February, midsize conventional models were at 26 percent and large pickups reached 5-percent penetration.

Compact CUVs hit 20 percent, midsize CUVs were at 19 percent and compact premium conventional models reached 53 percent to lead all segments.

Leasing penetration for subcompacts hit 7 percent, midsize utilities climbed to 28 percent, midsize vans reached 19 percent and large conventional models came in at 18 percent.