The Association of Consumer Vehicle Lessors (ACVL) has announced that member leasing companies reported a total reduction in new leases from 2 million in 2002 to 1.6 million in 2003. This 19.8-percent volume decline shows the continued effect of high cash rebates and interest rate subsidies, combined with longer loan terms. Manufacturer programs have created low monthly loan payments and induced some consumers to finance rather than lease their new vehicles. Since the peak of leasing in 1999, leasing volume has fallen more than 50 percent from 3.4 million new leases to 1.6 million new leases in 2003.

In 2003, captive total leases were down 20.5 percent, while bank leases were down 16.3 percent. Large lessor lease volume dropped 21.5 percent compared to 6 percent for medium lessors. For both the bank and captive lessors, the volume of the larger members declined more than smaller ones such that the average (unweighted) volume decline was 14.9 percent for captives and 6.4 percent for banks.

"There were a number of factors contributing to lower lease volumes," explained Rob Mize, ACVL President, "including the expansion of the 0-percent retail installment programs and other similar manufacturer installment sale promotions, continued declines in residual values (causing higher monthly lease payments making leasing less competitive compared to financing), and fewer manufacturer subvented lease programs. However, those trends appear to be abating in 2004, so lease volume may climb this year."

ACVL members also reported that their end-of-term residual losses decreased somewhat in 2003. Residual losses declined to $2,909 in 2003 from a weighted average of $3,269 in 2002, an 11-percent decrease. While the declining residual loss level was a welcome development for lessors, consumers who had leased their vehicles continued to reap substantial benefit by having lessors absorb these used-car market losses. While it appears that residual losses will fall during 2004 and over the following years, leasing still protects consumers from unexpected declines in trade-in values. Consumers have come to appreciate the protection that leasing affords them from excess depreciation.

The ACVL survey highlights a number of areas in which bank and captive vehicle leasing programs differ. For example, the average lease term of bank lessors was 51.4 months in 2003, compared to 38.6 months for captive lessors.

This is the largest difference in the 11 years for which lease data has been compiled by the association. Additionally, on an unweighted basis, more than 20 percent of new bank leases were longer than 60 months.

ACVL has conducted its annual member lease survey since 1993. ACVL members account for an estimated 80 percent of all consumer vehicle leasing in the U.S.