Two Market Indicators to Watch as Leasing Comes Back Strong

by Jon LeSage, editor of Used Car Market Reports

It wasn’t that long ago that leasing flooded the market and had a big impact on used vehicle values. While automakers are being more cautious these days about not overloading the market with too many leasing transactions, it is making a real comeback. Here’s my take on two market indicators that are important to pay attention to….

Larry Dominique, president of ALG, says strong residual values are changing the marketplace. Automakers that traditionally avoided leasing, like Hyundai and Kia, are embracing this finance channel as they see residual values strongly perform.

Rising quality and tight availability of Korean brands has taken up the transaction prices and resale values, too, Dominique said.

Rising demand in vehicles is expected to keep residuals strong. The ALG team doesn’t expect a market flooding to happen again where used vehicle values take a dive as they did not that long ago. That is likely to happen in 2017, though, Dominique said.

Swapalease, which matches parties interested in getting out of their leases with those interested in getting a competitive lease deal, has seen more attractive pricing for leases in the past year.

Car lease prices from the most popular brands dropped 3.8% in monthly payments during the past year.

There were extremes – the Cadillac CTS saw a huge price decline of 31.5% compared to a year ago. The Ford Escape was on the other end of the scale, seeing monthly payments go up 31.5%.

Lessees making the trade held their cars for a slightly longer period in the past year – 20.1 months remaining in June (on 36-month leases) compared to 20.9 months last year.


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