The Future of Leasing

If there’s one component of finance that’s gotten hammered hard in the past year, it’s leasing. Like lenders, lessors have tightened underwriting across the board. What makes things more difficult is the fact that so many lessors have curtailed their businesses or exited the market altogether. In a nutshell: Fewer providers are offering leases, and of those that remain, qualification standards are tough.

Technically, it would seem that leasing would be a popular option these days, with car buyers seeking the lowest possible monthly payments. But because lessors have reined in residual value estimates, monthly payments are not that much cheaper than loan payments. Put simply: Leasing has lost its edge.

In its heyday, leasing commanded about a third of the financing market. These days, I wouldn’t be surprised if the ratio were closer to 10%.

Will leasing ever rebound? Sure, when the memory of residual value losses fades. For now, though, with financiers scrambling to survive the current new-vehicle-sales nosedive, leasing will remain elusive.