PIN: Leasing Rates Take Dive

By Joe Overby, Staff Writer
September 02, 2008

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WESTLAKE VILLAGE, Calif. — The effects of leasing pullbacks started to gain steam in the first few weeks of August, as industry-wide lease penetration sunk to its lowest monthly level in four years, according to the Power Information Network.

More specifically, lease penetration through the first 24 days of August dipped to 13.3 percent, the smallest it has been since 2004. This level represents a 4.7-percent drop from July and a 5.1-percent decline from August 2007.

Not surprisingly, Chrysler has shown the biggest fall. Its leasing level was at 1.8 percent through Aug. 24, a 21.6-percent downturn from July and an 18.8-percent softening from last August.

While Chrysler might generate the most attention, leasing pullbacks have been widespread. According to PIN, American Honda and Hyundai/Kia were the only multi-franchise automakers whose lease penetration levels didn't fall from July.

The Daimler Group, for instance, was down 16.5 percent in leasing compared with last month, and General Motors fell 7 percent.

Conversely, financing rose significantly, representing 59.9 percent of all retail transactions, the highest level since December 2004, officials indicated. Chrysler's finance penetration was 78.6 percent and Ford's was 67 percent.

Average loan lengths were unchanged from July at 64 months. However, Chrysler's average loan term dipped from 68 months to 64 months, "suggesting Chrysler's strategy of substituting longer-term loans for leases is still in the launch phase," officials indicated.

Turn Rates

Moving on, the industry-wide retail turn rate was significantly worse from Aug. 1-24 compared with July. Units sat on dealers' lots for an average of 69 days through Aug. 24, an 11-percent increase from July.

This surge in inventory age has been spurred mostly by large non-luxury vehicles, analysts explained. This segment's turn rate jumped from 99 days to 113 days from July and was the highest of any vehicle category.

Days to sell have also worsened for midsize models, as well, increasing by six days.

"As one would expect in today's fuel-efficiency-starved environment, compact vehicles continue to turn faster than midsize or large vehicles — though compact vehicles' movement has slowed slightly since July," officials noted.

For example, non-luxury compacts have taken, on average, three weeks less time to sell than midsize units. Average turn rate for non-luxury compacts was nine weeks quicker than large vehicles.

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