After a Period of Decline, EVs Provide a Jolt to the Leasing Market

CHICAGO, Aug. 01, 2024 (GLOBE NEWSWIRE) -- A new TransUnion (NYSE: TRU) study released today found that consumers are beginning to turn to auto leasing once again, with electric vehicles (EVs) playing a key role in helping drive the reemergence of this market. This follows an extended period of decline in the auto leasing market brought forth by the pandemic.

The study, The State of Auto Leasing: Current Trends and How to Leverage Them In the Future, explored emerging trends in auto leasing ranging from volume to loyalty measures to vehicle types, in addition to the credit profiles of those who leased and financed.

The study found that the ratio of auto loans to leasing is beginning to look more like that which was seen in 2020 as opposed to the post-pandemic lows of late 2021 and 2022. In fact, from Q1 2023 to Q1 2024, leasing volumes increased from 539K to 714K, a figure much more in line with the 781K observed in Q1 2020. The research also showed a corresponding regression in loan originations as consumers are considering their choices with leasing options now available.

“Consumers are once again returning to leasing as an attractive and affordable alternative to financing new vehicles. This allows them to have the features they want at a subscription-like payment model they have become familiar with across products and services today,” said Jason Laky, executive vice president and head of financial services at TransUnion. “This upward trend also offers benefits to dealers as it means more consumers coming back to their showrooms, and also a return to a steady supply of gently used vehicles for the pre-owned market.”

Leasing Volume Has Increased From Post-Pandemic Lows and Is Approaching Pre-Pandemic Volumes

Source: AutoCreditInsight by S&P Global Mobility, TransUnion

The study also looked at the credit profiles and activity among those consumers who terminated a lease to gain insights into what those consumers did next. The study found that 38% leased another vehicle while a combined 28% financed one, whether their existing lease via a buyout, a new vehicle, or a used vehicle.

The credit scores (VantageScore 4.0) among all of these groups were similar, within approximately a 30-point range. Each group saw a similar payment increase over their previous payment. Those who leased a new vehicle saw an increase in of $120 a month as opposed to their previous vehicle, while those who financed a different new or used vehicle saw increases of $213 and $62, respectively. However, as monthly lease payments are typically lower, those who leased continued to see lower average payments ($707 per month for non-luxury financed vehicles vs. $517 per month for non-luxury leased vehicles).

Incentives and Increased Options Fuel EV Leasing

The overall percentage of leases that could be attributed to electric vehicles has also seen a significant increase in recent years. In Q2 2024, the percentage of leases attributed to EVs was at 16.5%, as compared to Q2 2022’s 11.0% figure.

Among the driving factors in the rapid growth of EV leasing are the following:

• A stabilization, and then increase, in the inventory levels of EVs at dealerships
• An increase in dealer lease incentives among EVs
• The application of IRA tax credits towards leased EVs beginning in January 2023
• More EV options at lower leasing price points for consumers
• An increased preference for a lower or maintenance-free leasing option for EVs
  

This increase has gone a long way in reshaping the EV origination market as more consumers are now leasing their EVs rather than financing them. In Q2 2024, nearly 50% of all EV originations were as the result of a lease, more than double the percentage that could be found three years prior. At the same time, the percentage of EV originations that were financed was down from more than half in Q2 2021 to barely one-third in Q2 2024 – pointing to an increased popularity in auto leasing.

Consumers are Increasingly Choosing to Lease EVs in Lieu of Financing

Source: AutoCreditInsight by S&P Global Mobility, TransUnion

“Auto leasing has been up overall in recent quarters, but nowhere more so than in the EV market, where leasing has now surpassed financing as the preferred option among consumers,” said Satyan Merchant, senior vice president and auto and mortgage line of business leader at TransUnion. “Multiple factors have contributed to this, but two of the most significant include an increase in lower-priced models being introduced, as well as more new dealer leasing incentives on EVs.”

Not all was quite as rosy when it came to study results, however, as it showed dealers still have work to do when it comes to enticing first time leasees to engage in the market. In fact, year-to-date in 2024, only 30% of leasees are leasing for the first time, down from 33% in 2019.

Merchant continued, “Fewer consumers are choosing to become first-time leasees. This ultimately decreases the lifetime value of those consumers and limits opportunities for dealers, so that’s an area of concern. But it’s also a real growth opportunity for dealers moving forward, as many consumers who may be looking for a pre-owned vehicle later in 2024 and into 2025 may find fewer lease returns resulting in a smaller inventory. That’s a group that dealers should consider trying to turn into first-time leasees and should aggressively market towards.”

To learn how TransUnion TruAudience can help dealers and lenders identify marketing opportunities that can help maximize ROI, click here. To learn more about the study, click here.

About TransUnion (NYSE: TRU)

TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.

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