Vehicle affordability is an issue that has been much talked about recently. As the pandemic and its related supply chain issues limited vehicle production as the decade began, auto manufacturers made concerted efforts to richen their mixes, building highly contented, more expensive vehicles.

While this was a sensible reaction to the situation, it also left shoppers seeking affordable new or used vehicles with nowhere to turn.

Recently, Honda announced an initiative to promote certified pre-owned vehicle leasing to address the current affordability gap. While leasing has long been available in the certified pre-owned (CPO) market, it has never been actively promoted or encouraged by dealers or manufacturers.

Ads to promote leasing in the CPO market are rare, and leasing transactions typically account for only 1-2% of premium CPO transactions. This small percentage reflects the limited use of leasing as a financing option among buyers, even in the premium segment.

Honda, a well-known mainstream brand that transacts a significant number of CPO units, has set out to change this by actively promoting leasing for CPO vehicles.

Not only will this effort address affordability by offering low monthly payments to consumers, but it will also offer dealers several advantages that should enhance their businesses overall.

The lower-payment advantage offered by leasing a vehicle is no secret. For several decades, leasing has typically accounted for 20-30% of new-vehicle transactions.

Leasing allows consumers to pay for only the portion of the vehicle they use, resulting in a lower monthly payment for the average consumer. However, leasing has been markedly less prevalent in the used and CPO portion of the market. Perhaps one reason is the mileage restrictions that usually are part of a lease contract.

It is more likely, however, that used vehicles have presented such a compelling price advantage over new vehicles that the lower payments leasing offers were unnecessary. As used-vehicle prices have increased, though, that dynamic has changed.

The primary advantage of CPO leasing is that it provides consumers with an additional viable purchasing option in a market where choices may seem abundant, but affordability remains a concern. Despite a return to incentives in the new-vehicle market, elevated new- and used-vehicle prices persist, limiting accessibility for many buyers. Those who lease can often find a CPO vehicle for which the payment fits their budget.

For dealers, the advantages of CPO leasing are numerous. First, it allows them to cater to customers they otherwise might have missed out on altogether. It also offers a competitive edge against third-party or online retailers who don’t offer factory-backed CPO programs. With CPO leasing, customers still engage with dealerships, fostering long-term connections that ideally lead to loyalty for the dealer and the manufacturer.

On the sales floor, CPO leasing can offer a logical approach to addressing affordability concerns. When customers find a new or CPO vehicle financially out of reach, salespeople can guide them towards pre-owned leasing.

Dealers who are already invested in CPO sales will find it offers another advantage. It not only presents another opportunity to engage with the customer, but for those dealers who have embraced so-called second-tier certifications, CPO leasing can offer them a steady stream of certifiable vehicles.

Similar to leasing a new vehicle, leasing a CPO vehicle allows the dealer to stay informed about the vehicle’s activity throughout the lease period. When they get back the vehicle at six years old, they better understand its history, providing additional peace of mind for potential resale. This enhances the quality of information they can offer to future customers.

By presenting slightly older vehicles as leasing alternatives at a lower cost, dealerships can provide customers with more accessible choices. With the introduction of second-tier CPO programs for older vehicles, encouraging CPO leasing creates a channel for these vehicles to transition into the CPO market once their lease terms expire, effectively expanding the CPO inventory pool for dealers while simultaneously meeting consumer demand for more affordable vehicle acquisition options.

CPO leasing offers so many advantages to consumers that it is difficult to imagine that it won’t become the industry norm. The main obstacle to certified pre-owned leasing lies in dealerships’ individual engagement with current CPO programs.

Dealerships deeply invested in CPO sales are likely to embrace leasing options, as they understand the costs involved, such as certification expenses. Dealers not currently proponents of CPO are much less likely to engage in CPO leasing.

Manufacturer incentives play a crucial role in incentivizing dealers to certify vehicles and promote CPO activity, so the success of CPO leasing initiatives hinges largely on the relationship and incentives between manufacturers and dealerships.

The CPO leasing initiative, though it may start slowly, represents another opportunity for a segment of the market previously alienated by high prices to access vehicles. Brands like Honda, Toyota, Kia and Hyundai have an advantage due to their continued production of sedans, which cater to buyers still interested in cars.

While demand for sedans in the new market may be declining, it remains stronger in the used market, where leasing in the certified pre-owned space enhances the opportunity for these customers to acquire a vehicle. The bottom line: Getting shoppers into vehicles they can afford remains a good thing for them and dealers.

CPO leasing is yet another way to accomplish that.

Ben Bartosch is manager of certified pre-owned solutions at J.D. Power.