WESTLAKE VILLAGE, Calif. -

The tentacles of the Japanese disaster’s impact on vehicle production continues to have a far-reaching effect on the auto industry, and a prime example of this is the downswing in May leasing.

Lease penetration in May dropped 1.6 percentage points month-over-month to 18.6 percent, according to the latest Industry Health Review from J.D. Power and Associates.

Thomas King, senior director at J.D. Power, told Auto Remarketing on Wednesday that the inventory restraints spawning out of the Japanese earthquake’s production disruption were the key factors to May’s decline, both from an indirect and direct perspective.

“Most of the May results are associated either directly or indirectly with the inventory constraints resulting from production disruption from the Japanese earthquake,” he said, then breaking it down by indirect and direct impacts on leasing, beginning with the indirect effect.

“The inventory constraints caused several manufacturers to reduce incentive spending, which was executed in part by a reduction of lease support,” King explained. “The reduction of lease support is partially responsible for the drop in industry lease mix.”

As far as the direct impact, he added: “Inventory constraints also led to a change in the mix of vehicles sold in May, with vehicle segments with low lease penetration (such as large pickups) growing their share of industry sales, which tends to reduce industry lease mix.”

Looking at individual segments in the leasing market, the only ones to show a month-over-month increase in May were the compact conventional model, which climbed 6 percent from April as it reached a penetration level of 27 percent, and the large conventional segment, which gained 28 percent to come in at 15-pecent penetration for May.

King did emphasize, however, that although leasing has dropped considerably since hitting an apex in February — when it reached 23.1-percent penetration — rates remain above year-ago levels, with May coming in 0.5 percentage points stronger than May 2010.

Furthermore, he pointed out that offsetting the month-over-month lease decline was a bump-up in the share for cash sales.

As far as financed sales, King noted: “The proportion of sales that were financed was relatively stable from April to May, but we did see an increase in the number of loans that were financed with 72-month or longer loans — 72-plus-month loans accounted for 26.1 percent of sales in May, its highest level in recent history.”