By on December 3, 2013

2013 Hyundai Elantra GT Exterior
The Great Recession has given us so much since it began five years ago with the fall of Lehman Brothers and Washington Mutual, from underwater mortgages and high unemployment, to bailouts of the financial and automotive manufacturing sectors and credit freezes.

Regarding the last item, a byproduct from said freeze will flood automakers with the potential to retain and steal customers when more and more leases draw to completion in the next year.

Leasing has come back into vogue as of late due to low interest rates, easy credit terms and improved residuals, allowing automakers to keep more of their profits while giving the lessee lower payments. In turn, 23 percent of new-car registrations through September 2013 are through leases, a number that should rise as wave upon wave of lease customers return to the showroom for the latest and greatest.

This fact is not lost on any of the automakers wanting to bag and tag as many customers from the booming off-lease salmon run as possible. Case in point: GM, who rolled out their lease-conquest program nationwide last month, offering $500 through January 2, 2014 to non-GM customers to lease most of the Chevrolet and all of the GMC lineup. Meanwhile, Hyundai will offer more early-termination deals so that their customer base never even make it to the run.

And how long will this run last? ALG Inc. president Larry Dominque says automakers should have plenty of fish to catch until 2017, with those whose customers are loyal will focus on retaining their stocks while those who ready to fill their coolers will be aggressive with their bait, such as lower payments and nicer incentives.

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37 Comments on “Off-Lease Boom Means Major Conflict For All Automakers...”


  • avatar
    Detroit-Iron

    But what is the glut of off-lease cars going to do to the new car market? Or is used-car inventory already so low that it doesn’t matter?

    • 0 avatar
      Astigmatism

      “But what is the glut of off-lease cars going to do to the new car market?”

      Make it viable again? I’m aiming for another two or three years in my Acura, with a CPO A6 as the reward for surviving the next Presidential election season.

      • 0 avatar
        Detroit-Iron

        I am confused, you are holding on to your car for a couple more years, then buying a used car?

      • 0 avatar
        28-Cars-Later

        Worried your constituents might come after you, Congressman?

      • 0 avatar
        Astigmatism

        I am holding onto my currently-six-years-old car for another two or three years, then trading it in for a then-three-years-old car.

        28: not sure it’s kosher for Congresspeople to drive imports. I’m simply impressed that we all survive fifteen straight months of cheap analysis, political ads and push polls.

        • 0 avatar
          Lorenzo

          Fifteen months? The presidential election begins in earnest the day after the 2014 mid-term election. Unofficially, the jockeying for the 2016 nomination began right after the 2012 election.

          We’re getting close to a continuous campaign season, something that already happens for members of the House, who have to campaign for re-election before they’ve found all the bathrooms in the Capitol Building.

        • 0 avatar
          28-Cars-Later

          @Astigmatism

          The more things change the more they stay the same.

        • 0 avatar
          Detroit-Iron

          I still don’t understand your point. How is a glut of off-lease used cars going to make the new car market “viable again”?

          • 0 avatar
            cdnsfan27

            People coming off a lease typically lease again. We have a ton of people coming off lease in the next 6 months, most have already chosen their next vehicle.

  • avatar
    SCE to AUX

    I’ll be curious to see how EVs such as my Leaf fare when they come off lease (mine ends in late 2015). There is no way I’m paying the buyout price, but if I still like the car I may lowball. Nissan will never resell it for my buyout price, especially since Customer #2 won’t get a subsidy.

    • 0 avatar
      bball40dtw

      Does your buyout price reflect the subsidy being applied to the original purchase price? I’m sure the residual is overly optimistic on many of the EVs. I see some for sale between $18K and $22K.

      • 0 avatar
        SCE to AUX

        Nissan takes the subsidy for themselves, so the customer doesn’t have to deal with the income tax issues. So the starting price is effectively MSRP minus $7500 (in this case).

  • avatar
    That guy

    This seems shortsighted.

    First, if bunches of people are turning in their leases in the next year or so, won’t that bring used car prices down?

    Secondly, if incentives (buy and lease) keep getting better, won’t that reduce the appeal (and cost) of a used car even further?

    I don’t see the current high value of used cars sticking around much longer, if I were in the market that would definitely sway my decision towards leasing.

    • 0 avatar
      sportyaccordy

      Most people still can’t afford to get a new car, even with a lease. Plus used car inventories are way down due to the abysmal sales during the recession as well as stuff like Cash For Clunkers. People are also selling their cars less. So there are a lot of economic/demographic indicators that point to used car prices staying higher than “normal” for a while.

      The biggie is really going to be financing. Mortgages are already creeping up; I’m sure auto rates and other credit rates will follow and hurt affordability a bit. They will still remain pretty low though.

      • 0 avatar
        highdesertcat

        And starting with the first payday in January 2014, many people who never had health insurance before will see a chunk of their paycheck go to mandated health insurance premium payments OR the alternative IRS tax penalty.

        So that takes some disposable income off the table that could otherwise have been used for a car payment, lease or loan.

        For most people it is not going to be easier to buy or lease a car. In order to do that you have to have enough money to make the payments to begin with.

        I know! Let’s raise the minimum wage to $25 a hour!

        • 0 avatar
          APaGttH

          If you can’t afford health insurance, and your driving around in a CPO BMW, you’re priorities are screwed up.

          Oh but I’m healthy. Yup. That’s what I told myself and when I was 23 I shattered my clavicle and dislocated my shoulder (and was not driving around in a CPO BMW at the time).

          It’s all it can never happen to me…until it happens to you. You get insurance to cover what you CAN’T afford – and the average American couldn’t come up with $2000 in free cash if their life depended on it – literally (do a Google search on that depressing fact).

          The average uninsured American is a case of Influenza away from being buried in debt up their arse. But hey, at least you can get a car loan at 30% once you’re credit is destroyed.

          • 0 avatar
            highdesertcat

            There are quite a few people not driving anything these days. You’d be surprised how many peers of my grand daughters ask to bum a ride.

            My former daughter-in-law is an RN who works at the Regional Medical Center and the story she tells me about people without insurance is heartbreaking. Like you said, one ER visit and they can file for bankruptcy.

            In that respect O*amacare is a blessing until you factor in that these people drive around in beat-up old clunkers as well and don’t have enough money to buy a good car, much less take money out of their pocket to pay for health insurance.

            Tax credits don’t mean doodly if you don’t have to file a return to begin with because your income is too low.

            This situation is not just limited to the gas&sip where I live. It gets worse when you extrapolate it to the big cities.

        • 0 avatar
          sportyaccordy

          Ah, the old ‘jumping behind irrelevant political talking points to divert the convo’ trick. Sorry, not jumping for it. All indicators point to strong used car prices for the next couple of years, regardless of what happens with “Obamakare”

          • 0 avatar
            highdesertcat

            It doesn’t seem irrelevant to me if many people cannot now afford to buy any car, new or used, and much less put fuel in it and do regular maintenance.

            I completely agree with you that car prices, both new and used, will continue to remain high for quite a while. That leaves out some more people.

            I also agree with you that C4C was a major contributor to the shortage of used cars on the market because so many good, used cars were needlessly destroyed to appease treehuggers.

            Making car loans easier to get for people already strapped for money, isn’t going to help them make the payments if they don’t have the disposable income to begin with.

            Of course, people strapped for money still need a place to live and that is good for the landlords. It was after 2008 and it is even better now.

            I am certain we will be raising rents in 2014 as well to whatever the market will bear. Might as well get in on the gettin’ while the gettin’ is good.

          • 0 avatar
            sportyaccordy

            There have always, and will always be people who cannot afford to buy any car, new or used. So the idea that Obamakare will change anything in that regard is a little silly.

          • 0 avatar
            golden2husky

            …used cars were needlessly destroyed to appease treehuggers…

            Uh, no. That was greenwashing pure and simple. The real reason to destroy those vehicles was to prop up sales a
            of new vehicles and the economy. This proud treehugger would have been much happier if the better condition vehicles that were collected were given to those who are true working poor who drive poor condition, polluting, unsafe vehicles out of need. Getting those gross polluters of the road and giving the truly needy poor an opportunity to have a decent reliable car would have been a win for all.

          • 0 avatar
            highdesertcat

            sportyaccordy, maybe you’re right. Both sales and SAAR are up, for now. Let’s see if the ‘used’ market takes off starting in Jan 2014.

            So if what you say turns out to be true about people not being affected by the increased cost of their health care, then we, and all the landlords can merrily raise the rent on our properties.

            golden2husky, I lament the loss of all the vehicles who went to the crusher, no matter how humble or how exotic each was.

            I am well aware that C4C was also aimed at selling Government Motors cars as part of the bailout, handout and nationalization strategy of the current administration.

            As someone who grew up in the smog of LA, CA, I appreciate the clean air of New Mexico.

            But if you want to see gross polluting cars, look at many of the 20, 30 and 40 year old trucks and cars the illegals are driving all across America. We have a bunch of them here in NM before they fan out all over the country.

            And IIRC, Toyota was the biggest beneficiary of C4C even though many of their cars of the 80s and 90s are still on the road today — at least in my area where there is no such thing as rust.

            The majority of people who drive gross polluting cars did not fall for the C4C sleight of hand and are still driving them.

          • 0 avatar
            sportyaccordy

            Landlords never tied their rents to healthcare costs and they never will. And they will continue to raise rents as much as the laws allow and the market will bear, just as they always have. You are all over the place dude.

        • 0 avatar
          Zoom

          The insurance tax penalty won’t be deducted from your paycheck. If someone doesn’t voluntarily pay it, about the only way for the IRS to collect it is from a tax refund.

  • avatar

    Leasing today definitely makes good sense. It’s hard to know for sure what the used car market (and then residuals on new leases) will do.

    Cars today last longer than they ever have, and really aren’t all that hard to work on. Still this doesn’t change the two facts that less people are willing to work on their own car, and people want new(er) cars rather than to keep the same car for 200k.

    • 0 avatar
      Halftruth

      I beg to differ. They are plenty hard to work on. Harder if anything.
      I will agree cars are more refined and reliable but those things come at a cost. More complexity means more skills are needed to troubleshoot when something does go wrong and that drives up costs as well.

      • 0 avatar
        sportyaccordy

        I dunno. An Accord today is not much different from an Accord from 20 years ago. Yes obviously there are new features and stuff. But mechanically a lot of it is the same. The suspension and brakes work the same. A lot of the engine parts have been made either more robust or meant to last for the life of the car (i.e. timing belts vs chains). IF something really goes wrong, like a transmission blowing out or whatever, just as you probably wouldn’t rebuild one on a 93 you wouldn’t rebuild a 2013 one. Just get a rebuilt one with a warranty and swap it in. Same with engines. I agree that electronics do add a layer of complexity, but most cars are not bad electronically, and the companies with bad electronics today are the ones that had bad electrics 20 yrs ago.

        • 0 avatar
          smartascii

          A partial list of technologies present in the 2013 Accord that were not present in the 1993 Accord, and that require specialized training to work on:

          -Variable Valve Timing
          -Gasoline Direct Injection
          -Continuously Variable Transmission
          -Every bit of OBDII-related emissions sensors and equipment
          -Traction and Stability Control
          -7 of the 8 airbags in the car

          • 0 avatar
            sportyaccordy

            Honda brought variable valve timing to the forefront years ago with VTEC, along with BMW’s VANOS (Honda being variable lift, BMW being variable timing). The first VTEC car was the 89 Civic SiR, and the first VANOS BMWs were the 92 cars with the M50 engines. So the technologies were around 20 years ago.

            Mitsubishi introduced DI to gasoline in 1999 and diesel has had DI for decades.

            Subaru had CVT in its 89 Justy.

            OBD-II is hardly difficult to service. Better than watching for the beeps on OBD-I cars.

            Stability/traction control systems don’t really go AWOL. And an airbag is an airbag.

            At the end of the day, cars today aren’t much harder to service or practically more complex than they were before, because at the end of the day when complex parts break we don’t rebuild them, we just replace them outright. New technologies are often simpler to service than the ones they replace.

        • 0 avatar
          Kyree S. Williams

          I had a 1990 Accord not long ago, which of course pre-dated OBD-II, and it gave me a check engine light. Getting the codes required using a makeshift tool—a bent hair clip—and completing a circuit between two contacts, then watching the pattern of the warning lights as they blinked and referencing a specific code based on that pattern. I would have loved to just plug something in and read a code…lol

          • 0 avatar
            SoCalMikester

            had a 98 civic that started running rough and gave a CEL around 2002ish. plugged in the scantool, it told me

            “primary O2 sensor heater circuit malfunction”

            5 minutes on google told me which 2 wires to check on the O2 sensor sitting on the exhaust manifold. no ohms, open circuit. $225 at the local dealer, and an hr later id replaced it and cleared the code.

      • 0 avatar
        ash78

        Depends on the scope — things like easily-accessible, color-coded dipsticks or clear brake reservoirs weren’t common 20 years ago. You could say that BASIC maintenance is easier today, and that maintenance intervals are longer, but everything else is much, much harder — diagnostics, emissions systems, the plethora of sensors, general electrical, delicate & complex interiors, and so on.

        Most of the latter is designed to last no longer than the first owner of the car, and that’s stastistically all that matters to most carmakers.

        My 15-year old car has now had a cracked brake reservoir and has all kinds of crumbling plastic and rubber under the hood. All the work I do now is more complex because things get broken while other things are getting repaired. But now I’m ranting…

        • 0 avatar
          krhodes1

          How is diagnostics harder? The car can TELL you what is wrong with it in many cases. You may need some specialized software, but even an ODBII reader is waaay better than reading tea leaves back in the day. And then there is the fact that there is a lot less diagnosing being done, because cars are so much more reliable in the first place. I’ll take Canbus architecture over wirebundles as thick as my wrist any day, and twice on Sundays. There are THREE wires going into the door of my BMW, vs. countless on my ’02 Grand Cherokee, most of which broke over time.

  • avatar
    PrincipalDan

    I remember living in Detroit in the early part of the 00s. Leases were big and Ford seemed to be pushing them harder than anyone with their “Red Carpet” lease specials. Avis Ford literally had a used car lot almost completely full of Ford Taurus and Mercury Sables (sedan and wagon) with nice option packages and around 30,000 miles on them. If my purchasing power had been a little better I would have ended up with one.

    Although the 1997 Escort wagon I purchased served me well till the ex-wife took it in 2009.

    I look forward to lots full of gently used lease vehicles at steep depreciation again. :)

    • 0 avatar
      Acd

      The main eligibility requirement for a Red Carpet Lease in the 1990’s was the ability to fog a mirror when it was held under the applicant’s nose. My dog would have qualified for a 2 year Taurus lease at $229 per month back in 1995.

  • avatar
    CompWizrd

    I’m debating buying out my 2010 Fit Sport when the lease is up in 3 months, so I guess I’m one of those off-lease buying people :) they want $9100 for it plus tax, comes to a hair over 10k.. I’ve only put 40k miles on it in 3.75 years.

    New ’13 would cost me about 330 a month to lease, or $24.5k w/tax give or take.

    Most asking prices at dealerships for a ’10 are around 14-15k around here, private is around 12.5-13… plus 13% tax on both.


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