Leasing is back in the Metro Detroit area, which closed 2012 with a 44.5% auto leasing rate, the highest of any U.S. metro region, according to R.L. Polk & Co. data on retail and fleet registrations.
Polk also discovered that Michigan had an overall leasing rate of almost 38%, making it the third-highest among state leasing rates, behind New York (39%) and New Jersey (38.4%). These percentages are more than double the national average lease rate of 17.5% last year. Before the credit crisis in 2007, Michigan’s lease rate was 50.7%, and Metro Detroit’s was nearly 57%.
Leasing at Detroit-area dealerships has been elevated for more than 10 years at stores selling Ford Motor Co., General Motors Co., and Chrysler Group cars, thanks to discounts for thousands of employees, retirees, family members, and suppliers of these domestic automakers.
One Ford dealer stated employee lease pricing on a Fusion is between $35 to $40 less than a retail customer’s monthly payment on the same car, adding that the more expensive the model, the better advantage there is in employee lease pricing.
A regional Chrysler Dodge Jeep Ram dealership owner indicated that his store’s lease rate was 60% to 70%, lower than the nearly 90% he saw in the mid-2000s, but much higher than the national average.
Leasing in the Metro Detroit region is common at foreign-nameplate dealerships, as well. A Toyota store reported that more than half its customers lease.
The recent uptick follows a hefty drop in leasing during the recession, when reports showed just 12% of new cars were leased nationally in 2009. When GMAC Financial Services and Chrysler Financial stopped financing in 2008, those carmakers ceased leases, and their peers followed suit. GM and Chrysler started leasing again the next year, but at a more gradual pace.
Leasing is back in the Metro Detroit area, which closed 2012 with a 44.5% auto leasing rate, the highest of any U.S. metro region, according to R.L. Polk & Co. data on retail and fleet registrations.
Polk also discovered that Michigan had an overall leasing rate of almost 38%, making it the third-highest among state leasing rates, behind New York (39%) and New Jersey (38.4%). These percentages are more than double the national average lease rate of 17.5% last year. Before the credit crisis in 2007, Michigan’s lease rate was 50.7%, and Metro Detroit’s was nearly 57%.
Leasing at Detroit-area dealerships has been elevated for more than 10 years at stores selling Ford Motor Co., General Motors Co., and Chrysler Group cars, thanks to discounts for thousands of employees, retirees, family members, and suppliers of these domestic automakers.
One Ford dealer stated employee lease pricing on a Fusion is between $35 to $40 less than a retail customer’s monthly payment on the same car, adding that the more expensive the model, the better advantage there is in employee lease pricing.
A regional Chrysler Dodge Jeep Ram dealership owner indicated that his store’s lease rate was 60% to 70%, lower than the nearly 90% he saw in the mid-2000s, but much higher than the national average.
Leasing in the Metro Detroit region is common at foreign-nameplate dealerships, as well. A Toyota store reported that more than half its customers lease.
The recent uptick follows a hefty drop in leasing during the recession, when reports showed just 12% of new cars were leased nationally in 2009. When GMAC Financial Services and Chrysler Financial stopped financing in 2008, those carmakers ceased leases, and their peers followed suit. GM and Chrysler started leasing again the next year, but at a more gradual pace.
Why this is not a good thing:
There is no discussion of term. My guess is most leases in Detroit are longer-term. There are two types of people who prefer a lease: Frequent buyers and payment buyers. Frequent buyers/lessees prefer to drive a new car every 36 months or so. A good example is the lessee who prefers to lease a vehicle so the payment can be expensed through the income statement and depreciated on the balance sheet for tax advantages. Another example is the enthusiast who would like to drive say, a luxury every 3 years. These lessees are wonderful for all. They come back to the dealership more frequently, there is less residual risk for the lessor, and defaults are quite low. Payment lessees? 60 – 72 month leases? Great initially for the dealers, but headaches for lessors. Now you have increased residual risk and credit risk. (recall the 90s) Longer-term leases are a feasible niche for captives for those with responsible credit histories. That’s my 2 cents anyway. Other thoughts?