2016 LEASE VOLUME SETS RECORD. Lease volume grew for the seventh consecutive year in 2016, achieving an all- time high o
LEASE M A RK ET RE P O R T J A N UA R Y 2 017
EXECUTIVE SUMMARY
Leasing Plays a Major Role in 2016 Record New Car Sales LEASE VOLUME 4.3 M 4M 3.6 M 3.2 M 2.6 M
2.6 M
2.5 M
2.3 M
2M
2M 1.4 M
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Key Takeaways 2016 LEASE VOLUME SETS RECORD Lease volume grew for the seventh consecutive year in 2016, achieving an alltime high of 4.3 million units. Over the past five years, lease volume has grown by 91% and has been a major catalyst in driving new vehicle sales in the U.S. LEASING STIMULATING SUV SALES With SUV prices heftier than those for cars, leasing is a way for consumers to enter this popular segment in a more cost-efficient manner. This helped SUVs outsell passenger cars for the first time ever in 2016. CONSUMERS ATTRACTED TO LOW PAYMENTS 2016 lease payments averaged $120 less than average finance payments. For large pickup trucks, which enjoy high residual values, lease payments averaged $206 less, representing the largest difference of all vehicle types. MILLENNIALS PROPORTIONALLY LEASE THE MOST Though they account for only 12% of all leases in the U.S., millennials lease more than any other age group as a proportion of their overall sales. Nearly onethird of millennials who purchased a new vehicle in 2016 decided to lease.
LE A S E M A R K E T R E P O R T
1
LEASING GROWTH
Leasing Drives Sales to Record Levels LEASE PERCENTAGE OF NEW VEHICLE SALES 35% 31%
30% 25% 20% 15% 10% 5%
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
0%
Leasing continues to grow as a percentage of new vehicle sales. In 2016, it increased to 31% (from 29% in 2015).
80% of Americans Finance at Their Dealership SALES BY PURCHASE METHOD CASH/INDEPENDENT FINANCE SALES
DEALER FINANCE SALES
60%
LEASE SALES 49%
50% 40%
31%
30%
20% 20% 10%
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
0%
The way consumers pay for their vehicles has completely changed over the past decade. Ten years ago, cash/independent finance was the most prevalent way people purchased a vehicle. That dropped from 41% in 2006 to 20% in 2016. In its wake, financing at the dealership (OEM/dealershipaffiliated bank) has increased along with leasing.
2
L EA SE M A R KET R EP O R T
LEASING GROWTH BY VEHICLE TYPE
SUVs, Trucks Power Leasing Growth LEASE VOLUME BY VEHICLE TYPE 2.5 M CAR
SUV
TRUCK 2M 1.5 M 1M .5 M
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
0M
Among the major vehicle segments, car lease volume is declining, which is in line with the greater market trend of declining sales. However, SUV sales climbed in 2016, outselling passenger cars for the first time ever. With that, we watched SUV lease volume grow to 1.9 million units and SUV lease penetration rate rise to 32%. Pickup trucks also experienced a lease volume boost. In 2016, 15% of trucks were leased, which grew from 14% year over year. With gas prices low and fuel efficiency improved, consumers are flocking to pickups and SUVs. The downside is the cost as they are considerably more expensive than passenger cars. Leasing reduces this burden and has been an avenue for consumers to purchase pricier vehicles. LEASE PENETRATION BY VEHICLE TYPE SUV
CAR
35%
TRUCK
30% 25% 20% 15% 10% 5% '06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
LE A S E M A R K E T R E P O R T
0%
3
LEASING GROWTH BY BRAND
Nearly All Brands See Leasing Bump INFINITI
63%
BMW
58%
LEXUS
55%
AUDI
52%
VOLK SWAGEN
51%
MERCEDES-BENZ
50%
JAGUAR
48%
LAND ROVER
48%
LINCOLN
48%
ACURA
46%
SMART
45%
CADILLAC
45%
BUICK
42%
PORSCHE
36%
VOLVO
36%
MINI
36%
HYUNDAI
33%
MAZDA
32%
HONDA
31%
JEEP
29%
KIA
29%
GMC
28%
NISSAN
27%
CHRYSLER
26%
FIAT
26%
CHEVROLET
25%
TOYOTA
24%
SCION
22%
FORD
21%
RAM
20%
SUBARU
2011 LEASE PENETRATION
20%
DODGE MITSUBISHI
2016 LEASE PENETRATION
14% 7%
Every brand except Mitsubishi experienced more leasing over the past five years. The Japanese big brands — particularly Honda and Nissan — saw the least growth, as they historically lease many vehicles anyway. Significant growth has come from truck/SUV brands such as Ram, GMC and Land Rover as the market flocked to these vehicles. 4
L EA SE M A R KET R EP O R T
LEASING GROWTH BY REGION
Lease Penetration Skews Regionally 2016 LEASE PENETRATION BY STATE
19% 15%
33%
25% 32%
17% 18% 10% 24%
29%
26%
64%
27%
35%
17%
13%
7%
9%
17%
2%
15% 8%
10%
14%
22%
14% 16%
9%
6%
58%
40%
21% 30%
15%
45%
34%
19%
32% 27%
37%
57%
9%
11%
34%
Lease rates vary wildly across the country. The tri-state area (NY, NJ, CT) tops 45%, while many states in the Southeast have lease penetration rates of less than 10%. Michigan, home of the domestic auto industry, has the highest lease penetration rate in the country. 2016 VS 2011 LEASING GROWTH
58% 84%
145%
117%
84%
94% 93%
76% 79%
91% 53% 36%
71%
50%
51%
47%
51%
56%
40% 40%
68%
69%
109%
76%
42%
62%
30%
77%
74%
53%
77% 78%
68% 26%
37%
54%
125%
74%
69%
76%
51%
22%
54% 29%
Leasing has grown in most states, but the middle of the country has seen the highest increase in leasing over the past five years. Lease penetration levels there are now closer to many coastal state rates. LE A S E M A R K E T R E P O R T
5
MILLENNIALS
Leasing Entices Younger Buyers to Enter New Car Market 2016 LEASE PENETRATION BY AGE GROUP 32%
31%
31% 30%
MILLENNIALS
35-44
45 -54
28%
28%
55-64
65-74
75+
Millennials lease rates are proportionally higher compared to other age groups. And it's only increasing — going from 21% in 2011 to 32% in 2016. AGE OF LESSEES WITH INCOME UNDER $50K
MILLENIALS 21.3%
AGE OF LESSEES IN ALL INCOME BRACKETS
MILLENIALS 12.3%
75+ 13.0%
75+ 6.7% 65-74 14.5%
65 -74 16.7%
35-44 21.3%
35-44 17.3%
56-64 21.5% 45-54 15.4%
56-6 4 16.3%
45-54 23.7%
Among all income brackets, millennials account for 12% of all lessees. However, among households with incomes less than $50K, millennials make up 21% of all lessees, the largest of all age groups. These lessees provide a tremendous opportunity for automakers and dealers since they are likely first-time new-car buyers who will provide multiple opportunities for repeat purchasing. 6
L EA SE M A R KET R EP O R T
MILLENNIALS
Millennials Leasing More Trucks, SUVs MILLENNIAL LEASE RATE 31%
MILLENNIAL LEASE RATE VS. OTHER AGE GROUPS MIDRANGE SPORT CAR
19%
COMPACT TRUCK
20%
LARGE TRUCK
29% 57% 18% 56% 46% 29% 54% 28% 71% 74%
58% 47% 38%
ENTRY SPORT CAR
25%
PREMIUM SPORT CAR
25%
LARGE TRADITIONAL SUV
2 2%
ENTRY LUXURY SUV
21%
LARGE CROSSOVER SUV
20%
MIDSIZE TRADITIONAL SUV
20%
MIDRANGE LUXURY SUV
18%
MINIVAN
17%
MIDRANGE LUXURY CAR
16% 15%
ENTRY LUXURY CAR 32%
MIDSIZE CROSSOVER SUV COMPACT CROSSOVER SUV
35% 23%
LARGE CAR
46% 34% 52% 17% 31%
13% 11% 10%
PREMIUM LUXURY SUV
9%
MIDSIZE CAR
7%
PREMIUM LUXURY CAR
7% 4%
SUBCOMPACT CAR COMPACT CAR
-2%
When compared to other age groups, millennials proportionately lease more of every segment, except compact cars. Millennials also lease more trucks and SUVs than other age groups and are helping drive the growing trend of truck and SUV lease popularity.
LE A S E M A R K E T R E P O R T
7
LEASING VS. FINANCE
Attractive Monthly Payments Keep Consumers Leasing LEASE MONTHLY PAYMENT SAVINGS SMALL CAR
$112
MIDSIZE CAR
$127
LARGE CAR
$122
ENTRY SPORT CAR
$124
COMPACT SUV
$116
MIDSIZE SUV
$122
LARGE SUV
$125
COMPACT TRUCK
$97
LARGE TRUCK
$206
MINIVAN
$108
LUXURY CAR
$84
LUXURY SUV
$65
Lessees save $120 per month on average compared to people who choose to finance. Lease terms average 36 months, while finance terms continue to lengthen, averaging 69 months in 2016. Among the new car segments, full-size pickup lessees save the most over financing. Lease payments on trucks are helped by high residual values, keeping monthly payments low. 2016 MONTHLY AVERAGE TERMS FINANCE TERM
8
LEASE TERM
64
64
63
63
2006
2007
2008
2009
67
63
66
69
65
68
64
2010
2011
2012
2013
2014
2015
2016
L EA SE M A R KET R EP O R T
FUTURE OF LEASING
Leasing Expected to Stabilize in 2017 2015 VS. 2016 LEASE PENETRATION BY MONTH
34%
32%
30%
28%
26% 2015 LEASE PENETRATION
2016 LEASE PENETRATION
24%
22%
20%
The outlook for leasing, even as rates flatten, is positive since we expect it to continue at a very high rate compared to historical averages. LEASE PENETRATION
26%
18%
2002
19% 16%
16%
17%
2003
2004
2005
20%
20%
21%
22%
22%
2010
2011
2012
27%
31%
30%
2016
2017 PROJ
29%
16%
2006
2007
2008
2009
2013
2014
2015
The escalation of transaction prices from increased content and technology, the market swing toward light trucks, and the growing millennial influence should keep leasing levels high. In 2017, we expect leasing to continue to be 30 % of the new vehicle market.
LE A S E M A R K E T R E P O R T
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