TransUnion
08/01/2024 | Press release | Distributed by Public on 08/01/2024 06:03
After a Period of Decline, EVs Provide a Jolt to the Leasing Market
Leasing Volume Has Increased From Post-Pandemic Lows and Is Approaching Pre-Pandemic Volumes
Source: AutoCreditInsight by S&P Global Mobility, TransUnion
The study also looked at the credit profiles and activity among those consumers who terminated a lease to gain insights into what those consumers did next. The study found that 38% leased another vehicle while a combined 28% financed one, whether their existing lease via a buyout, a new vehicle, or a used vehicle.
The credit scores (VantageScore 4.0) among all of these groups were similar, within approximately a 30-point range. Each group saw a similar payment increase over their previous payment. Those who leased a new vehicle saw an increase in of $120 a month as opposed to their previous vehicle, while those who financed a different new or used vehicle saw increases of $213 and $62, respectively. However, as monthly lease payments are typically lower, those who leased continued to see lower average payments ($707 per month for non-luxury financed vehicles vs. $517 per month for non-luxury leased vehicles).
Incentives and Increased Options Fuel EV Leasing
The overall percentage of leases that could be attributed to electric vehicles has also seen a significant increase in recent years. In Q2 2024, the percentage of leases attributed to EVs was at 16.5%, as compared to Q2 2022's 11.0% figure.
Among the driving factors in the rapid growth of EV leasing are the following:
· A stabilization, and then increase, in the inventory levels of EVs at dealerships
· An increase in dealer lease incentives among EVs
· The application of IRA tax credits towards leased EVs beginning in January 2023
· More EV options at lower leasing price points for consumers
· An increased preference for a lower or maintenance-free leasing option for EVs
This increase has gone a long way in reshaping the EV origination market as more consumers are now leasing their EVs rather than financing them. In Q2 2024, nearly 50% of all EV originations were as the result of a lease, more than double the percentage that could be found three years prior. At the same time, the percentage of EV originations that were financed was down from more than half in Q2 2021 to barely one-third in Q2 2024 - pointing to an increased popularity in auto leasing.
Consumers are Increasingly Choosing to Lease EVs in Lieu of Financing
Source: AutoCreditInsight by S&P Global Mobility, TransUnion
"Auto leasing has been up overall in recent quarters, but nowhere more so than in the EV market, where leasing has now surpassed financing as the preferred option among consumers," said Satyan Merchant, senior vice president and auto and mortgage line of business leader at TransUnion. "Multiple factors have contributed to this, but two of the most significant include an increase in lower-priced models being introduced, as well as more new dealer leasing incentives on EVs."
Not all was quite as rosy when it came to study results, however, as it showed dealers still have work to do when it comes to enticing first time leasees to engage in the market. In fact, year-to-date in 2024, only 30% of leasees are leasing for the first time, down from 33% in 2019.
Merchant continued, "Fewer consumers are choosing to become first-time leasees. This ultimately decreases the lifetime value of those consumers and limits opportunities for dealers, so that's an area of concern. But it's also a real growth opportunity for dealers moving forward, as many consumers who may be looking for a pre-owned vehicle later in 2024 and into 2025 may find fewer lease returns resulting in a smaller inventory. That's a group that dealers should consider trying to turn into first-time leasees and should aggressively market towards."
To learn more about how TransUnion TruAudience can help dealers and lenders identify marketing opportunities that can help maximize ROI, click here. To learn more about the study, click here.