Leasing as a New Car Purchase Trend in the US

When considering the purchase of a new car in the United States, one trend that has been notable over the years is the rise of leasing. The percentage of new cars leased varies, typically between 25% and 33% of all new-car sales. This means one out of every four to one out of every three new cars sold in the US are leased editions. The dynamics of this leasing trend have shifted over time, influenced by economic factors and current market conditions.

Economic Shifts and Leasing Trends

During the early stages of the pandemic in the first quarter of 2020 (Q1 2020), there was a sudden shift in the leasing rate. The rate dropped from approximately 31% to 26%. This change was not surprising, considering the broader economic impact of the global pandemic. However, as the world gradually recovered, and the economy began to show signs of growth, this rate started to increase again. In mid-2021, the leasing rate was estimated to be around 28% or 29%, a trend that continues to grow as of recent data.

Historical Context

Historically, about 32% of new cars have been leased. This figure has generally fluctuated based on the credit status of the economy. Tougher economic years have seen this percentage drop slightly due to various factors such as tighter credit conditions and increased financial pressures on consumers.

Current Influences on Leasing Rates

Several factors are currently influencing the leasing trend in the US car market. Notably, the significant increase in new-car prices is a major contributor. As car manufacturers have faced rising material and labor costs, the prices of new cars have surged. This has made initial payments for buying a car more expensive, leading many consumers to consider leasing as a more financially viable option.

Pros and Cons of Leasing

Leasing a car comes with its own set of benefits and drawbacks that consumers must weigh. On the positive side, leasing allows individuals to drive a new car every few years without the worry of depreciation. This can be appealing to those who enjoy the latest technology and driving experience. Additionally, leases often come with comprehensive warranties, which can provide peace of mind for car owners.

On the downside, leases usually come with mileage restrictions and lease-end obligations, which are not typically present in outright purchases. Maintaining the car during the lease term can also be more expensive, as some lease agreements require the return of the car in top condition, which can be costly. Moreover, at the end of the lease term, those who lease often find themselves with no equity in the car, as it is not owned outright.

Conclusion

The trend of new cars being leased in the US continues to evolve, with recent increases driven by rising car prices and changing consumer preferences. Understanding the factors that influence this trend, such as economic conditions and the financial aspects of leasing, can help consumers make more informed decisions when choosing a new car.