GM has special offers for Chevrolet, GMC, Buick and Cadillac drivers whose leases end as far out as June 30. (Charles V. Tines / The Detroit News)
An estimated 3 million U.S. drivers will turn in leased vehicles this year, igniting competition among automakers eager to lease or sell them new ones, and providing a large pool of late-model used cars and trucks for those seeking cheaper alternatives.
Lease “pull-ahead” deals — which let motorists turn in leased vehicles early so they can get into a newer car — could grow 20 percent in 2014 compared to last year, according to Swapalease.com, a website that matches customers who want to end their lease agreements early with people who are looking to take on a short-term lease. The trend is an indicator of a growing consumer hunger to drive the latest and greatest.
The offers come as the new-car selling rate is slowing and the auto industry’s daily inventory levels are at their highest level in five years, according to researcher ALG.
The 3 million lease turn-ins would represent a 50 percent increase over 2012, said Scot Hall, executive vice president at Swapalease.com.
“We definitely are getting back to pre-recession-type levels in terms of volume in automotive sales, as well as getting back to historical highs of lease penetration,” Hall said in an interview. “When you couple those two factors, you have a greater number of leases coming back.”
That points to good deals for consumers, particularly for those with leases that will expire soon. After lease availability plunged during the auto crisis, the percentage of new vehicle sales that are leased — not bought — is quickly approaching 30 percent, which would be the highest rate ever. Last year, U.S. customers leased more than 3 million vehicles.
But long-term pull-ahead specials — especially if they begin to stretch beyond the typical two-to-six-month, “get-out-of-lease-nearly-free” trend — could inflate the supply of used cars and trucks and depress prices to the point where potential new-car customers start looking at newer used vehicles instead.
For the past five years, the supply of used cars in the U.S. has been tight. In part, that’s because 2009’s federal “cash for clunkers” program took 750,000 older cars and trucks off the road. In addition, wary cash-strapped drivers have hung on to cars and trucks longer; the average vehicle on American roads is more than 11 years old, according R.L. Polk & Co.
Tom Kontos is executive vice president of ADESA Analytical Services, which tracks used-vehicle prices. He says more late-model used cars are needed, especially those that can be sold as certified pre-owned by dealerships. But he said if too many off-lease cars are dumped into the marketplace all at once, that prices of even late-model used cars could drop to the point where they hurt new-vehicle sales.
Pull-ahead offers increase
Automakers are upping their pull-ahead offers to try to retain lease consumers; it is much easier to keep somebody who leases than it is to retain customers who buy cars outright. By offering customers an opportunity to drive a newer vehicle before their current lease terms end, they can keep them from cross-shopping other brands.
Current lease-pull ahead offers vary by automaker, brand and even model.
Hyundai Motor America, for example, has an offer for Tucson crossover drivers whose leases end as far out as July 31. Hyundai will waive all payments between February and July if they lease or buy another Hyundai.
General Motors Co. has an offer for any Chevrolet, GMC, Buick and Cadillac drivers whose leases end as far out as June 30. Those customers could get up to $1,000 toward a new lease or purchase of certain GM models; Cadillac owners can get as much as $2,000.
The first returns on the two-year-old Experience Buick lease program will start rolling in next month. That program, which includes routine maintenance such as oil changes and tire rotations, Sirius XM radio and OnStar Directions and Connections services, has nearly tripled the brand’s lease rate to almost 37 percent.
Ford is offering an out for Fusion, Escape and Edge customers up to five months early.
The acceleration in lease pull-ahead offers reflects a return to the pre-recession auto industry, and changing consumer trends.
Most notably, automakers are speeding up the rate of mid-cycle tweaks and complete overhauls. They add gadgets to cars nearly every model year. The result is an expanding number of consumers who don’t want to wait the length of their lease for an improved car or truck.
What’s happening to cars is similar to the rapid pace of the smartphone industry: Americans replace their smartphones, on average, once every 22 months. For cars and trucks — which are perceived as pieces of technology as much as they are modes of transportation — the mentality does not differ greatly.
“What has happened to the market is that it’s more competitive than ever and is moving faster than ever,” said Karl Brauer, analyst at Kelley Blue Book, in an interview. “The connected technology seems to change almost quarterly.”
A small but growing number of consumers are also choosing to transfer their leases, whether to unload an expensive vehicle they no longer can afford, or because they got the sudden itch to drive a new car or truck.
Swapalease.com says the number of lease transfers last year climbed 10 percent to 10,000. It expects that number to jump another 10 percent in 2014.
LeaseTrader.com, another lease transfer website, says transfers are accelerating at a 30 percent clip.