Equifax and Moody’s: Lease Activity Gaining Steam

April 23, 2012

Did you know you can lease used classic cars just like you do new cars?

ATLANTA and NEW YORK — CreditForecast.com recently discovered through data from Equifax and Moody’s Analytics that most consumers looking to buy a new vehicle are still financing their purchases with loans rather than leases.

However, analysts found the volume of leases is expanding rapidly and expected to grow approximately 50 percent by the end of 2017.

Equifax and Moody’s Analytics tabulated that total U.S. auto lease balances increased 9.0 percent in March compared with a year ago, more than twice the increase in auto loan balances, which grew by 4.2 percent over the same period.

The firms also noticed lease balances originated by finance companies in particular rose 11 percent in March versus a year ago.

CreditForecast.com forecasts auto lease balances to grow at an 8-percent average annual rate through the end of 2017, while auto loan balances are expected to grow between 2 percent and 3 percent annually during the same period.

“Auto finance companies have ramped up the number of leases they are providing to well-qualified borrowers with higher credit scores,” explained Amy Crews-Cutts, senior vice president and chief economist of Equifax.

“Leases are growing in popularity in California, Florida and the Northeastern part of the country,” Crews-Cutts surmised.

Cristian de Ritis, Director of Consumer Credit Economics at Moody’s Analytics, added, “Growth in originations by auto finance companies will drive further expansion in lease balances over the next five years. Auto finance companies, who issue the large majority of auto leases, are more sensitive to the growth of the U.S. economy, and as the economy grows, they are likely to grow their auto lending originations faster than banks will.

“CreditForecast.com now provides a unique capability to quantitatively and qualitatively analyze the unique dynamics of these markets,” de Ritis went on to say. “The new data helps auto lenders and investors to more accurately evaluate, model and benchmark their portfolios and credit strategies, to account for the impact of current and expected local economic conditions.

CreditForecast.com pointed out that lease financing represents approximately 10 percent of U.S. auto lending provided by finance companies, who originate a little more than half of all U.S. auto credit. The site noted financing from banks and credit unions comprise the remaining portion of U.S. auto lending.

More Lease Analysis in Luxury Segment

In related news, the latest commentary from J.D. Power and Associates touched on leasing as well, tying together softening luxury model retail sales to moderating leasing activity for those kinds of vehicles.

J.D. Power determined the retail sales share within the luxury segment stood at 10.8 percent halfway through this month. A year ago, it was 12.1 percent.

“The decline in luxury share of retail sales is one of the reasons why lease penetration is down in April, as the luxury market typically has a higher lease penetration than the non-luxury market,” J.D. Power indicated.

“Through the first 15 selling days in April, lease penetration overall is 17.7 percent — the lowest level since December 2009 and down from 20.2 percent in April of last year,” analysts added.

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