If your franchised dealership showroom is located in Michigan, Texas or Massachusetts, it’s probably not uncommon to see new metal leaving the lot attached to a lease. But if your new-car store sits in New Mexico, West Virginia or Arkansas, the leasing volume likely is considerably less.
Experian Automotive analysts broke down the top 10 and bottom 10 states based on the percentage of new vehicles leased during the first quarter. According to the latest State of the Automotive Finance Market report, the top 10 included:
1. Michigan: 62.7 percent
2. New Jersey: 55.7 percent
3. New York: 50.7 percent
4. Texas: 44.6 percent
5. Washington: 44.0 percent
6. Connecticut: 40.1 percent
7. Ohio: 37.5 percent
8. Massachusetts: 36.9 percent
9. California: 34.1 percent
10. New Hampshire: 32.8 percent
“When you look at where vehicles are being leased, Michigan has always been a very heavy leasing state in part because of the manufacturer programs that you’ll see in that state,” said Melinda Zabritski, Experian’s senior director of automotive finance and a keynote speaker for the SubPrime Forum later this year during Used Car Week.
“Overall those top states for leasing do have a higher concentration of population densities,” Zabritski continued during a conversation with Auto Remarketing on Tuesday.
Meanwhile, the bottom 10 states settled this way after Q1:
1. Arkansas: 1.0 percent
2. Utah: 1.7 percent
3. Vermont: 3.4 percent
4. West Virginia: 3.5 percent
5. Alaska: 4.5 percent
6. South Dakota: 5.7 percent
7. New Mexico: 6.1 percent
8. Mississippi: 8.1 percent
9. Louisiana: 8.4 percent
10. Missouri: 10.3 percent
“When you look at the states with a lower concentration of leasing, some of it is an impact of the trends for vehicles in those markets as well as some of the geographic dispersity of those markets,” Zabritski said.
“Places like Utah, there are very few heavy population concentrations. You’ve got Salt Lake City and then big miles being driven,” she continued. “Some are states that are not very conducive to the restrictions of leasing.
“Some of the Southern states, just overall have some lower credit scores for the overall population,” Zabritski went on to say. “When you look at leasing overall, it tends to be a very prime product. So some of the states at the bottom tend to be ones where overall you don’t necessarily have that much really strong credit so you’ve got the subprime market leaning more toward a purchase rather than being able to qualify for a lease.”
But what if the leasing industry made an adjustment? That’s an option Swapalease.com executives are placing before finance company executives.
Swapalease.com reported lease credit approvals for May softened by 11.5 percent on a sequential basis as 69.6 percent of vehicle lease shoppers gained approval by the bank to proceed with a lease transfer compared with 78.6 percent during April.
Site officials indicated the year-to-date lease credit approval rate at 67.4 percent has performed slightly better than same time a year ago when 65.9 percent of lease shoppers were gaining approvals.
And despite some continued volatility each month, Swapalease highlighted the year-to-date approvals rate has steadily climbed each month since March when it dipped to a low of 63.4 percent.
Subprime customers continue to drive a large makeup of the lease declines each month, but Swapalease.com executives believe banks may want to consider relaxing their credit standards for approval.
Swapalease executive vice president Scot Hall pointed out the economy has continued to improve, unemployment continues to grow and delinquencies have remained in check throughout the economic rebound.
Furthermore, Hall noted subprime shoppers interested in taking over a lease would only have payment obligations typically less than 24 months, and their ability to make payments would actually help improve their credit profile.
“We’re hopeful that the industry will consider new ways to extend lease options to customers even with less-than-stellar credit,” Hall said.
“The industry has expanded risk environments to very long-term loans, and we feel the environment for risk would be muted in an environment of less than 24 months even for a subprime credit profile,” he went on to say.