Swapalease.com reported the highest number of credit approvals for vehicle-lease transfers in nearly three years.
Site officials said this week that the approval rate in September came in at 72.9%, representing a 4% increase from the August rate of 68.9%.
The last time credit approvals on Swapalease.com rose higher than 72.9% was in March 2016 when 75% of applicants were approved.
The site also mentioned the number of lease approvals is relatively high for the month of September, considering 69.8% of lease applicants were approved in 2018 and only 47.6% were approved in 2017.
Scot Hall, executive vice president of Swapalease.com, noted that lease credit approvals have been relatively consistent since January, with only slight fluctuations and an unexpected dip in June. Approval rates jumped up again in July and have remained steady until September.
“It’s clear that consumer spending has remained healthy, fueling a strong credit approval rating for the month of September,” Hall said in a news release.
“It will be interesting to see how spending habits will evolve and change as we approach the holiday shopping season,” he added.
Lease penetration a shade below 30% not only means that demand for leasing is strong, but future off-lease volumes should continue to be plentiful to a used-car market that hasn't just absorbed the additional supply, but thrived from it.
That’s according to analysis released Friday by Cox Automotive, which did the math on how current leasing levels will impact future off-lease supply, among other metrics.
With a retail lease penetration rate of 29.6% through eight months of the year, that means about 2.5 million vehicles and counting — with four months remaining — will hit the used-car market in coming years, potentially as certified pre-owned units, according to Cox Automotive.
“The wholesale and used-vehicle markets have been able to absorb the volumes of off-lease units returning to market driven by a strong used retail demand, particularly for high-contented vehicles,” the company said in its analysis.
“Certified pre-owned sales especially benefit from the ample supply of off-lease inventory which provides an attractive selection of nearly-new vehicles eligible to be certified,” it added.
They certainly have so far this year.
There are likely to be 2.75 million certified pre-owned sales in 2019, according to a separate Cox Automotive analysis. That would beat last year’s 2.7 million sales and mark the ninth consecutive record year. There were 2.1 million certified sales through the first three quarters of the year, which outpaces year-ago figures by 2.4%, Cox said.
The company is expecting a "plateau" in used-car sales, with the overall used market projected to reach 39.2 million in 2019 and 39.0 million in 2020, following used sales of 39.4 million last year, it said in a Wholesale Markets Insights report.
But in what Cox Automotive considers to be used retail (sales from independent and franchised dealers, excluding private-party figures), used sales are expected to climb from 19.5 million in 2018 to 19.8 million this year and 20.0 million next year.
As far as off-lease numbers for this year, Cox Automotive is projecting a peak of 4.1 million in lease maturities for 2019 and then a repeat of that in 2020. Last year, there were 3.9 million lease maturities, up from 3.4 million in 2018 and 3.0 million in 2016.
A peak in off-lease volume could help hold up used-car prices.
In a report earlier this month, Fitch Ratings said that the expectation-defying used-car price strength can be attributed to the growing gap in average new- and used-vehicle prices, plus lower incentives thanks to automaker production discipline. But still, recent months had shown incentives were starting to grow, Fitch said. If that holds up, the value proposition of a used car may lessen, as might the price.
"With off-lease vehicles expected to peak this year, it appears less likely that used vehicle prices will come under meaningful pressure in the near-term barring a sharp decline in the broader economy,” said Michael Taiano, senior director at Fitch Ratings, in the analysis.
“Additionally, the ongoing trade war and proposed tariffs on imports, if implemented, could further exacerbate the price differential between new and used vehicle prices, improving the value proposition for used vehicles,” he said.
Lease number breakdown
Volume-wise, there has been a 1.3% decline in the number of leases written through the first eight months of the year, Cox Automotive said. Still, the lease penetration rate mentioned earlier (29.6%) is still a percentage point ahead of full-year 2018 figures.
By brand, Infiniti topped the list with 66.4% lease penetration through eight months, followed by Acura, Mercedes-Benz, Land Rover, BMW, Audi and Lexus, respectively — all of which hover in the neighborhood of 60%, Cox Automotive said, citing IHS Polk Markit Insights.
Volkswagen leads the non-luxury pack with 42.8% lease penetration year-to-date through August, with Honda and Jeep next in line.
An analysis from KeyBanc Capital Markets last month projected an estimated lease penetration for 2019 is north of 31%, indicating these rates are at record heights.
You might need sharp eyes to notice, but Experian spotted an extremely slight decline in the volume of new-vehicle leasing booked during the second quarter.
Analysts also pinpointed the top 10 models generating the most leasing volume in Q2. And two of the vehicles can be seen pretty easily in a driveway or parking lot.
According to Experian’s Q2 2019 State of the Automotive Finance Market report, new-vehicle leasing saw a slight decrease as a piece of all new-model financing, softening from 30.41% in Q2 2018 to 30.04% in Q2 2019.
Experian also determined which 10 models rolled over the curb most often with leases attached during the second quarter. While sedans and crossovers filled much of the list, a pair of full-size pickups were included, too.
Here is the rundown:
1. Honda Civic: 4.2%
2. Chevrolet Equinox: 3.2%
3. Toyota RAV4: 2.7%
4. Honda CR-V: 2.5%
5. RAM 1500: 2.4%
6. Honda Accord: 2.2%
7. Jeep Grand Cherokee: 2.2%
8. Nissan Rogue: 2.0%
9. Ford F-150: 1.7%
10. Volkswagen Tiguan: 1.7%
Likely swaying consumers who want a full-size pickup to opt for a lease is the difference in payment that Experian reported. The average lease payment in Q2 for a RAM 1500 came in at $468 while for the F-150, that average checked in at $478.
Conversely, Experian found that the average monthly payment for a retail installment contract bought in Q2 for that same RAM 1500 computed to $657. And for the F-150, it was $667.
Also of note on the leasing front, Experian mentioned average terms grew slightly in Q2, moving from 36.19 months to 36.76 months.
The Q2 Lease Trends Report from Swapalease.com showed that the appeal of crossovers might be at a tipping point.
A year ago, Swapalease.com indicated roughly 7.4% of drivers polled said they would shop for a crossover if they needed to go out and lease a vehicle that day. A year later, the site discovered that number dipped slightly to 7.1%.
With all the explosive growth in crossover production by automakers, site analysts asked, “Is it not a vehicle that appeals to the lease crowd?”
Historically, Swapalease.com indicated a change in family size has been among the leading reasons why people have wanted to transfer out of their current vehicle lease.
A year ago, 11.5% of people said this factor applied to them, and this number has dropped further to 8.8%, according to the site’s Q2 report.
Conversely, 29.4% of people said they want to change their current vehicle type, and 23% indicated a desire to change their vehicle brand.
So, has crossover appeal plateaued to potential lease customers?
“Our latest lease trends show that crossover saturation may be setting into vehicle leasing, as the number of people who say they want to lease a crossover appears to be falling slightly from a year earlier,” Swapalease.com executive vice president Scot Hall said.
“Perhaps price and incentives play a role here, but it’s also possible that people are desiring other model types when leasing a vehicle today,” Hall continued.
Whether an individual is leasing a crossover, a sedan or a pickup, Swapalease.com also noted those people are paying more each month.
A year ago, Swapalease.com reported the average lease payment was listed at $474.80. As of Q2, this number is $506.13, an increase of 6.8%.
What’s more, the site mentioned that a year ago nearly one in five people said they would look for a payment between $200 and $299. A year later, this percentage has slipped to just 12%.
Furthermore, individuals considering the payment category between $500 and $599 generated the largest year-over-year jump in the report, climbing from 10.7% to 19.2%.
Pushback dealerships might hear from potential vehicle-lease customers come from individuals who say that using ridesharing services could be more cost effective rather than taking on a lease contract.
Well, the analyst team at Swapalease.com ran the numbers — taking into consideration that costs for ridesharing services are climbing — and recently shared an estimated cost analysis to show what the average transportation costs would look like.
All of sudden, leasing a vehicle became much more attractive, according to the Swapalease.com figures. First analysts used these assumptions to generate the full-cost breakdown.
— 10,000 miles traveled annually (lease)
— 25 miles per gallon / $3.00 per gallon (lease)
— Average number of rideshare trips per week: 17
Here are some scenarios Swapalease.com uncovered:
Average rideshare fare of $12.95
Rideshare monthly cost: $953.58
Monthly lease cost: $490.00*
Difference to Rideshare: +$463.98
Average rideshare fare of $14.25 (10% increase)
Rideshare monthly cost: $1049.38
Monthly lease cost: $490.00*
Difference to Rideshare: +$559.38
Average rideshare fare of $15.54 (20% increase)
Rideshare monthly cost: $1144.78
Monthly lease cost: $490.00*
Difference to Rideshare: +$654.78
*Includes $75 per month for parking, $100 for fuel, $15 for maintenance and $50 for insurance
Swapalease.com executive vice president Scot Hall examined the entire data report the site generated — which is available here — and arrived at these conclusions.
“Ridesharing services have completely transformed the way millions of people commute for both work and leisure, and will continue to grow in popularity especially in larger cities,” Hall said. “However, from a personal finances perspective, even when taking parking, fuel and maintenance into consideration, the costs associated with leasing continue to be lower than ridesharing as a primary mode of transportation.
“If the media chatter proves true and these costs rise further, consumers will need to take a harder look when considering these options for personal transportation,” Hall added.
The days of sports cars and luxury sedans dominating the lease market might be over.
That’s according to car lease marketplace, Swapalease.com. In its first quarter 2019 Auto Lease Trends Report, Swapalease.com is asking the question, “Is the luxury sports sedan lease dead?”
Swapalease.com executive vice president Scot Hall says luxury sports sedans are at least “really trending downward.” It’s a decline for a segment that Hall says has been a staple not just for Swapalease but for leasing in general for many years.
“They have been kind of the sought-after cars, if you will,” he said in a phone interview with Auto Remarketing.
He is seeing that people who used to want those luxury sports sedans are moving to SUVs of the same make. And over the last decade or so, luxury manufacturers have offered high-end SUVs. Leading the charge there is the BMW X5, Hall said, along with the Porsche Cayenne, and “more modern entries as well,” such as the Maserati Levante.
The Swapalease.com report shows various trends, including Web searches by vehicle brand in the first quarter of 2019 compared to the first quarter and fourth quarter of 2018. When looking at both of those charts, most readers will probably notice the big spike upward for the Dodge Ram. Searches for that brand went up by 25% compared to the fourth quarter of 2018 and by a whopping 93% over the first quarter of 2018.
Why? Hall said it was probably because the Ram came out recently with a complete redesign.
“I think that really spurred the sales of that particular vehicle, and they have been doing quite a bit more advertising as well,” Hall said. “But they’re really giving Chevrolet, for instance, and its GMC cousin a run for their money in terms of truck sales.”
He mentioned the news that Ram moved into second place ahead of the Chevrolet Silverado in truck sales for first quarter 2019, “which is essentially unheard of when it comes to the Big 3 trucks,” Hall said. “It’s very interesting to see that they are not only becoming a factor, but…just to break into that top two is very impressive [compared to] where they were just a couple short years ago.”
The 93% number for the Ram stood out, but the report shows gains in Web searches for the other vehicle brands, as well. Buick searches were up 41% compared to the previous year, Ford gained 15%, Chrysler was up 14% and Cadillac 10%.
Swapalease.com describes itself as “the world’s largest automotive lease marketplace and the pioneer in facilitating lease transfers online.” The company matches individuals who want to get out of their lease with people who are looking for short-term lease agreements, and one of the survey questions covered that aspect of leasing.
The survey asked for reasons people exercise their option to transfer out of their lease early and get into their next vehicle. In the first quarter of 2019, 13% of respondents said they did that because of a change in family size. That is compared to 8.1% from a year ago. Also, 38.3% experienced a change in income, and that was an increase from 34.8% a year earlier. Swapalease said in a news release that the increase might be “another sign that the economy continues to churn along at a healthy clip.”
Swapalease released additional tidbits of information in the report, which came out of a survey of more than 2,500 drivers across the United States:
— Luxury car leases were 65% from males and 35% from women. Women leased more small cars by a margin of 59% to 41%. But the results were more even in the area of hybrid vehicles, with 52% of the leases done by men and 48% by women.
— The type of lease people are currently driving supports the SUV trend mentioned earlier. The survey showed 24.6% of leases were SUVs in the first quarter, compared to 26.6% in fourth quarter 2018. Mid-size cars were second at 14.8%, followed by full-size cars at 11.1%.
—Asked the type of vehicle they would like to lease, 68% said import while 32% answered domestic.
—15% of respondents are driving an average of 7,500 miles a year on their vehicle lease. That is up from only 10.4% from a year earlier.
“This is a possible indication that more people are utilizing ride sharing and food delivery services, and driving less for work, recreation and everyday household tasks,” Swapalease said.
— The survey even showed “economy and lease confidence indexes,” with 54% of respondents expressing overall confidence in the economy compared to 53% in the fourth quarter of 2018. Forty-two percent had confidence in the economy looking ahead, compared to 37% from fourth quarter 2018, and 56% had confidence in leasing a vehicle today, compared to 50% in the fourth quarter of 2018.
“This is a possible indication that more people are utilizing ride sharing and food delivery services, and driving less for work, recreation and everyday household tasks,” Swapalease said.
Asked about used vehicle trends, Hall mentioned an area that he said “kind of went against the industry predictions,” and that is that the fallout in used-vehicle prices and values that was forecast a couple of years ago, especially as lease penetration decreased, has not materialized.
“I don’t think the gloom and doom that people thought was coming has actually come,” Hall said. “I think used car prices are down a fraction of a percent or so, but going back a couple years when leasing was absolutely at its peak, right at the 30 to 31% level of lease penetration, there were a lot of ‘doom and gloomers’ out there saying, ‘Oh man, when those cars come back off lease, the used-car market is going to be a mess.’ But that hasn’t come to fruition.”
Wantalease.com noticed Ford reversed many of the “generous discounts” on vehicle leases the Blue Oval offered in March by increasing monthly payments in April.
According to analysis shared on Wednesday, site officials noticed the Ford Fusion, Taurus, Escape, Explorer and Expedition all experienced price hikes this month. Wantalease reported the Fusion had the highest increase at 11.84%, bringing monthly payments to $209 per month.
The Explorer posted a 7.16% increase, while the Escape climbed by 5.95%. The Expedition rose by 5.37%, and the Taurus ticked up by 3.19%.
While monthly lease payments for these five Ford models moved higher, Wantalease discovered 75% of lease deals remained steady for April.
Site officials went on to note the Nissan Sentra continued to come in as the most affordable new lease deal of the month at $129. The Nissan Sentra has held this price for the past three months, following several price drops from the brand in February.
Wantalease also noted the vehicle that experienced the largest increase in monthly lease payment was the Honda Accord, climbing 22.41% to bring monthly payments to $249 per month.
The vehicle that posted the largest drop in price for April was the BMW X5, sliding by 15.30% to $739 per month.
While Ford took an active route, Wantalease executive vice president Scot Hall said, “We were not surprised to see such a large number of manufacturers maintain their prices for the month of April.
“We’re maybe expecting more aggressive price drops for the month of May as dealers prepare for Memorial Day sales and early summer specials,” Hall added.
With average federal tax refunding averaging more than $2,800, Swapalease.com sees the trend being a part of its approval lift seen in March.
Approvals for vehicle-lease transfer application on the site came in at 70.7%, which is up from the February rate of 65.9% as well as the reading from last March of 67.3%.
Swapalease said March experienced a higher number of applicants with qualifications that led to more approvals for taking over another person’s lease contract.
Since January, the lease approval rate has continued to rise, making March the strongest month of the first quarter. Approvals registered in at 67.6% back in January
Swapalease executive vice president Scot Hall referenced the roll tax-refund money might have played. Kroll Bond Rating Agency (KBRA) reported earlier this week that federal refunds averaged $2,873 through March, just $20 lower than a year ago.
“We are impressed by the number of applicants looking to take over another person’s lease for the month of March, as well as the increase in lease approvals,” Hall said.
“It is very likely that we saw more activity in March from people receiving their tax rebate checks and using them toward a lease in our marketplace, which in many cases avoids a down payment,” Hall added.
Leasing sticker shock is pushing more consumers toward websites such as Swapalease.com to find the vehicle they want at the price within their budget.
And as a result, credit approvals at Swapalease.com are softening.
Site officials indicated vehicle lease credit applicants registered an approval rate of 65.9 percent in February, marking a decrease from the January rate of 67.6 percent.
According to Edmunds, consumers find themselves paying as much as 26 percent more than they did in 2016 and more than $1,600 over the life of the lease on average. Analysts explained in this previous Auto Remarketing report that record-high new-vehicle prices, weakening residuals and rising interest rates are causing the increases.
Further evidence of price pressure also came from Experian through its Q4 2018 State of the Automotive Finance Market report. Experian noted the average lease payment for a new vehicle originated during the fourth quarter came in at $448, up $18 year-over-year.
Turning back to what Swapalease.com had to share, February contained a slightly higher number of applicants with qualifications for taking over another person’s lease contract during the month, but a slightly lower approval rating. February saw a slight increase in approval ratings in comparison to February of last year when only 65.2 percent of lease applicants were approved.
“We are seeing an increase in the number of applicants looking to take over another person’s lease this month, which usually result in more non-approvals from people who do not have the credentials to take over a lease,” Swapalease.com executive vice president Scot Hall said in a news release.
“Shoppers are seeking alternative outlets like Swapalease.com to shop for new leases, knowing they can find a better deal than what is currently being offered at the dealership,” Hall added.
The partnership momentum Auto Financial Group (AFG) generated during the fourth quarter now is helping one of the nation’s leading sources of residual-based financing and vehicle remarketing for financial institutions during the opening segment of 2019.
AFG recently announced that Pentagon Federal Credit Union (PenFed), the second largest federally chartered credit union in the United States based on assets, has signed on to AFG’s residual based financing program.
Officials highlighted the partnership with PenFed further reinforces AFG’s mission to expand into new markets to meet the rising consumer demand for residual based financing. AFG’s program will be available to PenFed’s member base of 1.8 million.
“The AFG program will allow us to extend residual based financing to a greater number of vehicles than our prior program. We will therefore be able to expand low monthly payment financing options for our members during a time when auto industry trends are pushing the limits of affordability,” PenFed vice president of automotive lending products and sales Ivan McBride said in a news release.
The program can allow PenFed to provide residual based financing for new and up to 5-year-old vehicles, while AFG manages the residual value risk and the vehicle turn-in process, making the processes more convenient for members.
“We are excited to welcome PenFed to the AFG family and look forward to contributing to their success and exceeding their expectations with AFG’s superior customer service,” AFG chief executive officer Richard Epley said.
To learn more about the AFG’s residual based financing programs, visit www.autofinancialgroup.com/products.
