Leasing Offers Welcome Boost to Dealer Profits, Experian Reports

A comeback in leasing continues, which is good news for dealers and consumers looking for more new-vehicle affordability, according to the latest “State of the Auto Finance Market” report from credit bureau Experian.

“Leasing ties hand-in-hand with inventory coming back, and with incentives coming back, too,” Melinda Zabritski, head of automotive financial insights for Experian Automotive, tells WardsAuto.

The report shows new-vehicle lease share at 25.4% in the second quarter, up from 21.1% a year ago, and just 19.3% in the second quarter of 2022.

Back then, and dating back to the start of the pandemic in early 2020, new vehicles were in shorter supply. With customers signing waiting lists for scarce new vehicles, automakers cut lease incentives. But new-vehicle inventory has rebounded since it bottomed out in 2022. Incentives have rebounded, too.

Growth in leasing is welcome for dealers. In the short run, leases offer customers more affordable monthly payments. That’s a bigger consideration since the Federal Reserve started raising interest rates in 2022, on top of already inflated new-vehicle prices.

”We believe there are several benefits that come from leasing,” Tony Pordon, executive vice president, Penske Automotive Group, tells WardsAuto. Bloomfield Hills, MI-based Penske Automotive has 152 U.S. dealerships, plus another 210 in other countries, mostly in the U.K.

“First, leasing can help keep the monthly payment lower. This should be good for consumers.  Second, leases usually turn every 24 to 36 months, so leasing can help drive higher units in operation,” Pordon says.

“Third, at the end of the lease, the lessee returns the vehicle to the dealership, and we, in turn, usually have the ability to sell that vehicle as a certified pre-owned.  So, the lease return feeds the used-car business and potential service opportunities,’ he says.

The average monthly payment for a leased vehicle was $148 less than for a loan in the second quarter of 2024, reports Experian. That’s only a few dollars higher than a year ago, but going farther back, in the second quarter of 2021, the average difference was only $109, Experian says.

The average monthly payment on a new-vehicle loan was $734 in the second quarter of 2024, vs. $586 for a new-vehicle lease, Experian adds.

“There’s no doubt that affordability is top of mind for many of the consumers that come into this marketplace, whether it’s on new or used vehicles,” says Michael Manley, CEO of AutoNation, Fort Lauderdale, FL. As of June 30, AutoNation had 251 U.S. dealerships, according to its quarterly report.

“And I think you'll continue to see OEMs responding in an appropriate way,” he says. That is, with lease incentives. “We’re managing that transaction price to help that situation and keep momentum in new-vehicle sales.”

Separately, Roger Penske, chairman and CEO of Penske Automotive Group, says the return of leasing is especially welcome for dealership groups like his, with a higher-than-average share of sales from luxury brands.

In an earnings conference call,  Penske reports that historically, the group’s share of sales from leasing is about 32%, and for luxury brands, more than 50%. Current levels at Penske Automotive Group are below those high averages but are headed in the right direction, Roger Penske says.

He describes the effect of the comeback in leasing as “powerful.”