The 1.8 million leases expiring between March and July could have notable short-term market implications, Thomas King, president of data and analytics at JD Power, told Auto Finance News.
King said the federal shelter-in-place directives may mean those lessees will not take out new leases or will extend their existing leases in greater-than-usual numbers.
Leases accounted for 31% of U.S. retail transactions last year. In March and April alone, more than 750,000 leased vehicle contracts are set to mature, according to JD Power.
When consumers return to market with expired leases, they have one of four options, King explained: 1) they can lease or purchase another vehicle; 2) extend their current lease; 3) buy out their existing lease; or 4) walk away without replacing their lease. If, say, 50% of leases set to expire in March and April are extended, that would imply 350,000 automotive units of “pent-up demand.” Those consumers will likely return to dealerships after lockdowns are lifted, King said.
President Donald Trump on Sunday extended the nationwide shelter-in-place directive to April 30.
“We’ve got a pretty challenging dynamic here,” King said. “There’s lots of moving pieces and it’s very hard to be definitive as to how the balance will progress.”
