Here’s at least one segment of the automotive industry that’s remaining relatively steady amid the coronavirus pandemic.
On Thursday, Swapalease.com reported its vehicle-lease credit applicants registered an approval rate in March of 69.3%, representing just a slight decline from the February rate of 72.3% and January’s reading of 70%.
March also generated a slight decrease in approval ratings from the previous year. Swapalease noted that 70.7% of lease applicants were approved last March.
Site officials also indicated March included a higher number of applicants with qualifications for taking over another person’s lease contract, reaching the highest number since December.
“It’s no secret that the we’re seeing a shift in automotive shopping trends as March was fused between several stages of stay-at-home mandates and an increase in social distancing practices,” Swapalease executive vice president Scot Hall said in a news release.
“We’re seeing an increase in shoppers who are looking for alternative channels to acquire their next vehicle, rather than visiting the dealer showroom where the risk of exposure to the virus could be greater,” Hall continued.
Earlier this month, Auto Remarketing welcomed Hall back for another episode of the podcast where he discussed site traffic and more. That episode is available through the window at the bottom of this page.
Coming off consumer-connected improvements in February, analysts at Swapalease.com and Wantalease.com shared their latest findings for approvals for vehicle-lease transfer applications as well as the most favorable leasing deals currently available.
The sites reported this week that several brands offered significant discounts on midsize cars and SUVs, likely a result of falling sales due to COVID-19. They said OEMs are offering aggressive deals on lease payments to attract shoppers and potential buyers.
Analysts found the Nissan Sentra is currently priced the lowest of all vehicles in March, coming in at just $139 per month for the fifth consecutive month.
While many vehicle leasing offers have remained steady in March, the sites noted dealers have offered more aggressive lease pricing on midsize cars and SUVs especially. In fact, the vehicle that saw the largest price drop moving in the month of March was the Mercedes-Benz GLS 450 with a 17.85% decrease. The vehicle is offered at $749 per month, followed by the Honda Accord at $249 (down 8.72%), the Volkswagen Jetta for $239 per month (down 7.62%) and the Volkswagen Passat at $289 per month (down 6.39%).
“We’re seeing manufacturers offer aggressive pricing on most mid-size cars and SUVs as the COVID-19 outbreak has made a significant impact on consumers and their desire to shop for cars and trucks,” said Scot Hall, executive vice president of both Swapalease.com and Wantalease.com.
“With a significant pullback in new-vehicle sales, automakers are looking for ways to attract consumers back into the consideration set for a new vehicle. We fully expect these budget-friendly lease offers to stick around for the next few months,” Hall continued.
Analysts pointed out the vehicles with the largest increased monthly payment are the Mercedes-Benz C300 with a 5.43% increase, and the Ford Expedition with a 3.69% increase in price from February. The C300 is currently offered at $459 per month, while the Expedition is available for $545.
Lease-transfer metrics for February
When it comes to consumers already in vehicle lease and looking to make a change, analysts reported vehicle lease credit applicants registered a 72.3% approval rate in February, an increase from the January rate of 70%.
The sites indicated the desire to have more flexibility in a lease has continued to be a primary driver for more people to seek vehicle leases with shorter terms that they can afford on secondary markets such as Swapalease.com.
Analysts found that February generated a slightly higher number of applicants with qualifications for taking over another person’s lease contract during the month and a higher approval rating. February saw a slight increase in approval ratings compared to February of last year when only 65.9% of lease applicants on the site were approved.
For reference, analysts also noted the approval reading in February 2018 came in at 65.2%, while posting a mark of 72.2% in February 2017 and 70% in February 2016.
“We are seeing an increase in the number of applicants looking to take over another person’s lease in February, as shoppers have been seeking alternative outlets like Swapalease.com to find vehicles with terms that suit their unique and personal needs,” Hall said.
“Shoppers want faster credit decisions and vehicle options available to them, right at their fingertips from the convenience of their own home. We will closely monitor how these trends evolve with COVID-19 on everyone’s minds these days,” Hall went on to say.
Swapalease.com reported that the rate of vehicle lease transfer approvals softened a bit during the opening month of the year compared to the closing month of 2019.
But compared to the start of the past two years, the January reading represented a notable improvement.
Site officials determined vehicle lease credit applicants registered an approval rate in January of 70%, a decrease from the December rate of 72%.
While the rate dipped on a sequential basis, Swapalease.com pointed out the January reading was much better than the start of 2019 when it was 67.5% as well as the opening month of 2018 when the rate came in at just 57.8%
Site officials explained January has historically been slightly lower on lease applicant volume following the rush of holiday lease shopping to close out the year.
“Shoppers who are looking to lease a new vehicle are relying heavily on sites like Swapalease.com to find more competitive terms and pricing than dealers are offering on their lots,” said Scot Hall, executive vice president of Swapalease.com.
“As consumers begin to receive their tax returns, we anticipate a spike in shoppers who may have been waiting until tax season to lease their next vehicle,” Hall added in a news release.
Used-vehicle sales, which various analysts have predicted to either decline slightly or remain steady, should remain north of 39 million units this year and continue to be a bright spot for dealers.
And among the tailwinds pushing the used-car sales market, along with credit access and pricey new vehicles, says BBVA, is what the financial institution calls a “robust supply” of vehicles coming off lease.
Citing its own research and Bloomberg, BBVA Research projects in its latest U.S. Auto Sales Chartbook that off-lease return and supply will reach 5.34 million units this year.
That would be up from 5.07 million units in 2019 and 4.48 million in 2018, according to the BBVA/Bloomberg data.
In fact, the 2020 forecast is the highest in a nine-year data set that includes actuals/projections for years 2014 through 2022.
The data, which assumes 36-month leases, anticipates that off-lease returns/supply will taper down to 5.13 million in 2021 before rising to 5.19 million in 2022.
If that happens, it would mean four consecutive years with more than 5 million annual lease returns.
Quite the volume, especially when considering off-lease volume was at 2.53 million in 2014, according to the BBVA/Bloomberg data set.
In a similar analysis, RVI Analytics said in its latest quarterly report that there was a 9.6% year-over-year increase in off-lease supply during December.
“Because of the strong leasing rates over the past two years, we expect off-lease supply to continue growing through 2021,” RVI said in the quarterly report.
As RVI noted, this run of high off-lease volume, of course, follows several years of hefty lease penetration rates.
In its report, BBVA — citing its own data and Haver Analytics — shows that the lease penetration rate (based on a three-month moving average) has approached or been in the neighborhood of 30% each year since 2015.
There has been ebb-and-flow, but the leasing penetration rate has generally moved upward since 2009, when it was in the teens, the BBVA data shows.
RVI, which measures lease penetration as a percentage of total sales (versus percentage of financing, as some do), found that leases represented 23.4% of total vehicle sales in the third quarter, compared to 22.5% in Q2.
But the firm is projecting a decline in lease penetration.
“Although we forecast lease penetration to decline over the next three years, we expect overall lease penetration to remain at high levels through 2020, hovering around 20.0% of total sales,” RVI said.
The company believes used-car supply growth, along with heavy incentives in the new-car market, will downwardly impact used prices.
“Looking ahead, our expectation is that used vehicle prices will decline 4.1% from current levels through 2021,” RVI said. “However, we expect additional volatility for used vehicle prices caused by the acceptance of EVs as more models are being introduced over the next several years.”
Swapalease.com reported that the approval rate for vehicle-lease credit applicants on its website finished 2019 at a strong pace.
Site officials reported this week that the approval rate came in at 72%, marking a rise from the November rate of 67.1%.
Swapalease.com found that December contained a slightly higher number of applicants with qualifications for taking over another person’s lease contract, leading to one of the highest approval rates for the year. September was the strongest month of the year with a 72.9% approval rate followed by May with a 72.4% approval rate.
The site pointed out the approval rate to finish the year was consistent with 2018 data that showed 71.4% of applicants were approved.
December’s rate also marked a notable improvement compared to the end of 2017 when only 62% of applicants were approved. To finish 2016, the approval rate was even softer as Swapalease.com recollected that it was just 54.2%.
Swapalease.com executive vice president Scot Hall examined the approval trends and offered this assessment.
“In 2018, we reported on the strength and confidence of the American consumer in the economy with consistent improvements in credit approval ratings throughout the year,” Hall said in a news release. “In 2019, we saw even stronger approval ratings as well as an increase in shoppers seeking alternative outlets such as Swapalease.com for their next vehicle.
“We anticipate continued strength entering 2020, but it will be interesting to see if any changing interest rate levels will impact credit approval rates,” he went on to say.
Dealer principals and general managers likely are used to seeing the healthy pace of their mainstream new models departing the store as a leased vehicle. In fact, Experian reported 28.76% of new models left franchised stores as a leased unit during the third quarter.
Well, leasing of exotic and vintage vehicles appears to be quite active, too, at least for Premier Financial Services (PFS), which specializes in this particular market.
PFS reported on Wednesday that overall leasing growth and demand for vehicles such as Ferraris, McLarens and Lamborghinis have remained strong over the past decade. From 2009 through 2019, the number of units financed by the company increased 85%, and the total dollars financed grew 178% during that period.
Since 2016, Premier Financial Services indicated vehicles financed and total dollars have increased 21% and 38%, respectively. PFS insisted this three-year performance is good news for what the company believes are “serious auto enthusiasts,” demonstrating that higher values for premium vehicles over the past decade are not based solely on their improvement relative to market pricing in 2009, during the economic recession.
“Our results over the past decade suggest that market interest in exotic, vintage and luxury vehicles has continued to grow,” PFS founder and chief executive officer Mitchell Katz said in a news release.
“Despite stock market fluctuations during that period, and generational shifts in taste with respect to specific marques, the number of serious automobile enthusiasts is currently at record levels,” Katz continued.
“Although nearly half of Premier’s lease transactions over the past decade came from returning clients, our growth also reflects many first-time owners and collectors from all age categories — including millennials, Gen-Xers and Baby Boomers — who appear to be unwilling to wait for retirement or to win the lottery before they can acquire the car of their dreams,” Katz went on to say.
Specialty leasing has gained wider acceptance as a financing strategy, according to Katz. He explained that specialty leasing — which is unlike closed-end lease arrangements orchestrated by captive finance companies — can provide car owners with greater flexibility, such as favorable options for lease termination.
Katz noted that feature is particularly important to exotic and vintage car owners, who often move in and out of cars on a frequent basis. In fact, Katz noted, the average length of a Premier client’s lease is around 24 months.
PFS went on to mention the industry’s traditional barometer for evaluating current market conditions has been based on supply and demand for new exotic models, as well as auction sale prices of vintage cars each year at well-known venues including Pebble Beach, Scottsdale and Amelia Island.
“Premier’s performance over the past 10 years, however, may provide a more reliable, long-term indicator of the industry’s health and outlook. In fact, many industry funding sources rely on PFS for accurate estimates of residual values for exotic and vintage cars,” the company went on to say.
Wantalease.com is looking ahead to one of the most romantic holidays on the calendar, not only reporting the most attractive lease offerings available in January but forecasting which red vehicles will be best to lease for Valentine’s Day.
Site officials recapped this week that several manufacturers offered attractive discounts and competitive pricing on midsize cars and SUVs, while most compact cars and full-size vehicle brands maintained their lease prices.
And if your store has a customer looking for a lease as part of that romantic holiday, Wantalease.com indicated the top three red vehicles to lease for Valentine’s Day are:
—The Audi A6 Premium in Red Metallic: The Audi A6 saw the largest price drop in January, with a -14.51% decrease in price. The vehicle is currently priced at $419 per month and offers a variety of tech options such as Apple Carplay, Amazon Alexa and SiriusXM to name a few.
—The Subaru Legacy 2.5i in Crimson Red Pearl: The Subaru Legacy experienced a -4.46% price drop in January, bringing monthly lease payments down to $308 per month. The vehicle boasts a symmetrical all-wheel drive system as well as premium driver assist technology.
—The Ford Explorer in Ruby Red: The Ford Explorer is another vehicle that experienced a significant price drop in January. The Explorer had a -12.84% price drop, bringing monthly payments to just $289. The vehicle has intelligent 4WD that optimizes powertrain and braking systems, allowing the vehicle to deliver the right amount of traction to match all driving conditions.
While the Explorer, Legacy and A6 experienced the greatest price drops in January, site officials pointed out the Nissan Sentra is the most affordable vehicle of the month. The Sentra has maintained its price for the past three months, with monthly payments as low as $139.
“It’s apparent that manufacturers are still holding steady to many of the discounts they offered throughout the holiday season to kick off the new year,” Wantalease.com executive vice president Scot Hall said in a news release.
“With tax season just around the corner, many automotive brands will surely continue to offer attractive lease deals moving into April,” Hall continued.
Wantalease.com added the vehicles with the largest increase in monthly payment include the Chevrolet Equinox with a 15.92% increase and the Ford Ranger with an 11.87% rise. The site said the Chevrolet Equinox is currently offered at $289 per month, while the Ford Ranger is available for $273.
If you work at a Honda store or your dealership is closely competing against one, there’s a good chance the new vehicles being delivered at that rooftop are connected to a lease.
According to Experian’s Q3 2019 State of the Automotive Finance Market report, analysts determined three of the top 10 new models leased during the third quarter were Hondas, including the top two vehicles.
Leading the way among the top 10 new leased models by market share was the Honda Civic at 3.9%. Not far behind was the CR-V at 3.4%.
Here is the complete top 10 for Q3 based on Experian’s information:
1. Honda Civic: 3.9%
2. Honda CR-V: 3.4%
3. Toyota RAV4: 3.1%
4. Chevrolet Equinox: 2.5%
5. RAM 1500: 2.5%
6. Jeep Grand Cherokee: 2.4%
7. Honda Accord: 2.4%
8. Nissan Rogue: 1.8%
9. Ford F-150: 1.8%
10. Toyota Corolla: 1.7%
Experian detailed what makes these 10 vehicles so attractive to lease. Analysts shared the average monthly payments when leasing one of these models versus signing an installment contract toward a purchase. Here is that rundown with the lease amount mentioned first, followed by the installment contract figure:
1. Civic: $303 versus $418
2. CR-V: $363 versus $478
3. RAV4: $379 versus $485
4. Equinox: $326 versus $465
5. RAM 1500: $451 versus $652
6. Grand Cherokee: $478 versus $600
7. Accord: $370 versus $484
8. Rogue: $351 versus $483
9. F-150: $457 versus $659
10. Corolla: $302 versus $415
Wantalease.com spotted leasing opportunities that could help franchised dealers finish 2019 on a high note.
Site officials reported the Nissan Sentra is currently priced the lowest of all vehicles, with payments as low as $139 per month. The Ford Focus is not far off with new lease payments sitting at $159 per month, followed by the Honda Civic at $169 per month.
While most vehicle prices have remained steady in December, Wantalease.com noted some dealers have offered lower lease pricing on vehicles of all sizes, mostly in anticipation of December and holiday specials.
The vehicle that saw the largest price drop coming into the month of December is the Nissan Frontier with a decrease of 8.59%. The truck is offered at $271 per month, followed by the Volkswagen Jetta at $229 (down 7.93%), the Lexus RX 350 for $419 per month (down 6.16%) and the Toyota RAV4 at $279 per month (down 5.64%).
“It is clear manufacturers are making a final push to achieve year-end sales targets to close out 2019,” said Scot Hall, executive vice president of Wantalease.com.
“Just as we saw last year, many automakers continue to offer competitive pricing for non-luxury models to enable healthy competition against luxury holiday specials,” Hall added in a news release.
Site officials added the vehicles with the largest increased monthly payment are the Nissan Titan with a 36.87% jump and the Nissan Altima with a 20.23% climb in price. The Nissan Titan is currently offered at $315 per month, while the Nissan Altima is offered for $229.
Swapalease.com reported declines in approvals for vehicle-lease credit applicants during October on both a month-over-month and year-over-year basis.
But site officials classified the movements in both instances as “modest.”
The site indicated its October approval rate registered in at 68.8%. That’s down from the September rate of 72.9%, as well as the October 2018 reading of 70.9%.
However, analysts pointed out that approval rates for both October 2018 and October of this year marked an improvement, considering only 55.6% of applicants were approved during the 10th month of 2017.
Swapalease.com mentioned the average credit approval rate for the past three months is 70.1%.
“Strengthening credit profiles and positive consumer credit behavior could be the reason for a higher than usual credit approval average,” the site said.
Swapalease.com predicts continued stability entering 2020 and remains optimistic that growth will continue throughout the first quarter of the year.
“We anticipate a continued increase in lease applicants entering 2020. Shoppers have remained confident in their ability to spend, and dealers are ready to deliver unprecedented lease deals as we close out the year,” said Scot Hall, executive vice president of Swapalease.com.
“As we near the end of 2019, attractive lease deals may entice shoppers to upgrade their vehicles. With more people seeking alternatives to new lease terms offered by dealers, we will continue to see increased traffic on Swapalease.com for people seeking shorter or custom terms,” Hall went on to say.
