Auto Leasing Regains Popularity Among Car Buyers
After four years of decline due to higher prices for used vehicles, auto leasing is back on the rise and has accounted for nearly 14 percent of new-vehicle sales by Detroit automakers in the second quarter, up from about 8 percent last year, according to a recent L.A. Times article.
Industry-wide, leasing has accounted for 20 percent of new-vehicle sales so far this year, up from 18 percent last year, but down from its peak of 36 percent in 1999.
Vehicles coming off leases at the end of contracts are typically sold at resale auctions; however when residual values are lower than expected, automakers can lose money. According to Paul Taylor, chief economist with the National Automobile Dealers Association (NADA), automakers are expanding their lease offers with the escalation of used-car prices.
Some vehicles returned at the end of the lease are mechanically tweaked and sold to consumers as certified used cars, backed by factory warranties. Factory warranties are sometimes extended on late-model vehicles with low mileage and no major damages.