Increasing inventory along with affordability concerns are sparking renewed interest in vehicle leasing after manufacturers held back on incentives over the past year amid low vehicle supply.
Leasing share of all new-vehicle financing contracts stood at 18% in Q3 2022, down from 27.3% in the same period of 2021 and 27.5% in Q3 2020, according to the latest data from Experian’s Automotive Finance Market report.
Leasing fell in 2022 due to consumer demand exceeding dealer inventory, causing OEMs to draw back on leasing incentives, Mike Buckingham, managing director of auto finance at J.D. Power, told Auto Finance News.
Incentives across the board have declined due to limited inventory on dealership lots. In fact, incentive spending as a percentage of average transaction price (ATP) was 2.2% in November 2022, down substantially from pre-pandemic levels when incentives were above 10% of ATP at the start of 2020, according to Cox Automotive.

Record-high ATPs to spur lease increases
As new-vehicle affordability fades and consumers are faced with elevated monthly payments, buyers will likely turn to leases for lower payments, leading to higher leasing numbers over the next 12 to 18 months, Paul Ritchie, president at Hagerstown Honda in Hagerstown, Md., told AFN.
New-vehicle ATPs reached a record high again in November at $48,681, a 0.9% month-over-month increase and a 4.4% increase year over year, according to Kelley Blue Book.
While the high cost of financing a vehicle will boost leasing numbers this year, the industry is at least two years away from reaching pre-pandemic levels of 30% or higher, J.D. Power’s Buckingham said.
OEMs get aggressive
“We’ve already seen in the fourth quarter a couple of the OEMs get very aggressive with leasing,” Buckingham said.
In fact, Nissan customers can lease a 2023 Rogue over 36 months for as little as $349 per month with a down payment of $3,279, according to the manufacturer’s website. That is well below Cox Automotive’s estimated average new-vehicle monthly payment of $762 in November 2022.
“What we’re seeing right now in some of the inventory buildup is high price units that dealers are having a little bit more difficulty selling because of their price point now that more inventory is available,” Buckingham said. “The dynamics are changing a little bit in the marketplace.”
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