J.D. Power and Associates discovered little changed on the new-vehicle leasing front in April when comparing month-over-month and year-over-year.

Senior director Thomas King indicated the fact that leasing stayed flat was consistent with recent levels “and in line with our expectations.

“Although there was some movement, the changes were modest, and we consider them within the limits of normal marketplace noise,” King told Auto Remarketing after the release of J.D. Power’s April Industry Health Review.

April’s new-vehicle lease level came in at 20.2 percent, identical to the March reading and just a shade above the same month a year ago when it was 20.1 percent.

Consistent with the flat lease mix across the industry, King noted lease mix across segments was also generally stable.

J.D. Power determined midsize conventional lease mix stood at 28 percent in April, up 4 percent month-over-month and 7 percent year-over-year.

“Although this is only slightly higher than in recent months and year ago levels, it does represent the highest lease mix in the segment we’ve observed in recent history,” King indicated.

Subcompact leases moved 6 percent higher both month-over-month and year-over-year in April, but the segment constituted only 7 percent of the entire new-vehicle lease market, according to the report.

J.D. Power also pointed out premium conventional leases ticked slightly higher in April, up 1 percent from March and 2 percent from April of last year to settle at 53 percent.

For the entire new-vehicle retail sales industry, J.D. Power placed April’s seasonally adjusted annualized rate at 14.38 million, which is just 0.1 percent higher than March but 9.2 percent above the same month a year ago.

What does the latest new-vehicle SAAR mean for leasing?

“In terms of the absolute volume of leases, strong retail sales are helping lenders generate more contracts,” King responded.

“However, some of the industry growth is being driven by the return to market of buyers with lower credit scores and these buyers generally have a lower propensity to lease vehicles,” he continued. “Leasing is (and will remain) a key purchase method for new vehicle buyers, particularly given the strong residual values associated with new products.”

And if those customers with lower credit scores aren’t leasing a new model, they could be signing a finance contract for 72 months or longer.

The number of new-vehicle financing deals for 72 months or longer might have softened slightly in April from the previous month, but King said the figures remain “at record levels from a historical perspective.”

J.D. Power determined new-model financing loans for at least 72 months constituted 29.3 percent of new-vehicle sales last month. While that level represented a 2.9-percent softening from March’s reading of 30.1 percent, it was still 19.9 percent higher than a year earlier.

“I wouldn’t classify 72-month contracts as losing momentum. While 72-month penetration dropped slightly from March, it remains at record levels from a historical perspective,” King explained.

“Demand for extended term loans remains (and is expected to remain) strong as buyers look to keep monthly payments low in the context of lower incentives and elevated average transaction prices,” he continued.

King then touched on what kinds of buyers predominantly are falling into the 72-month contract category.

“Across buyer credit tiers, demand for 72-month loans is highest among buyers with the lowest credit scores,” King noted. “Since buyers with lower credit scores are a major contributor to the overall growth in industry sales, they are a becoming a larger opportunity for lenders looking to grow their portfolio.

“Although the use of extended term loans does increase the risk associated with a finance contract (from a lender perspective), a combination of strong residual values on new vehicles and strong used vehicle prices (which means that buyers with a trade can reduce their loan to value ratio) are helping to mitigate that risk,” he went on to say.

Beyond leasing and financing duration, one other element of J.D. Power’s April report caught King’s attention.

“Throughout the first four months of the year, the premium vehicle segment has not kept pace with the overall growth of the industry,” said King, noting there are several factors driving this slower growth including:

—Relatively more new product activity in non-premium segments relative to premium.

—The growth in sales to lower credit buyers who have a lower propensity to purchase a premium vehicle.

—Fewer premium owners returning to market.

—Fewer non-premium owners “upgrading” to a premium product.