Car leasing at all-time-high in the US; UK to follow suit?
The number of vehicles leased in the US reached an all-time high during the first half of 2016, with both millennials and older people driving the growth.
The Lease Market Report from Edmunds, America’s largest motoring research organisation, shows that leasing has doubled in popularity in the US over the last five years, indicating that the new car market is on the verge of a fundamental shift in consumer behaviour.
The report found that leasing is most popular among US millennials, who make up 34.2% of the market. However, retirees or ‘seniors’ are also sold on the idea, with a further 32% of the US lease market’s customers over the age of 75. This is a profound shift in attitudes, as five years ago this age group made up just 19% of the market.
Usership over ownership
Jessica Caldwell, Edmunds' executive director of industry analysis, said: "Younger people are so conditioned to having monthly fees for things like their smartphone and streaming entertainment services that they don't necessarily expect monthly payments to result in eventual outright ownership."
On the link between the old and young generation, Caldwell commented: "Millennials and seniors actually have more in common that one might think, since both experienced deep economic recessions during their formative years that helped to shape their worldviews and made them more value-oriented.”
Edmunds reports that monthly payments for leases are on average 23% cheaper than other finance options in the US.
Although the majority of cars leased continue to be in the luxury and executive class, other segments have seen huge growth too, with compact trucks (214%), large trucks (142%) and large crossover SUVs (98%) witnessing the largest growth.
One in three new cars are leased
In the first half of 2016, leasing accounted for one-third (32%) of new car sales in the US. This represents a growth of 13% from 2015 and 41% from five years ago. While this is the highest rate in history, leasing continues to grow and the second half of the year will likely see an even higher percentage.
UK to follow suit?
The US has traditionally been a few years ahead of the UK when it comes to car leasing popularity, but news last month showed that personal and business contract hire is increasing significantly in the UK too.
The British Vehicle Rental and Leasing Association (BVRLA) recently reported a 9.3% jump in membership, while the Finance and Leasing Association (FLA) has found that personal contract hire (PCH) grew a staggering 77% in popularity in the year to February 2016 – making it the fastest growing form of car finance in the UK.
According to Edmunds, the “continued expansion of the lease culture” will not slow down any time soon in the US.
We could see similar levels of market penetration the UK very soon.