Analysts expect car sales to set ten-year records this summer, part of a trend that is two or three years in the making. Lots of factors contribute, including low interest rates and a decent job market, but one in particular caught our eye: the rise of leasing.
It’s a piece of marketing genius.
As Edmunds.com analyst Jessica Caldwell explains it, “Leasing guarantees that someone’s going to need a new car in two or three years, when their lease expires.”
The strategy goes back to the recession, when new car sales were in the toilet.
“As a result there weren’t a lot of used cars,” Caldwell says. With supply depressed, used car prices went up, and car companies realized they could make good money selling used cars— that is, cars with expired leases. Good enough money that they could charge less for the lease itself.
“Lease payments were really cheap, and all of a sudden, everyone started leasing,” Caldwell says.
That was 2012. Today, more than a quarter of new cars are leased.
At Perillo BMW in Chicago, salesman Rick Tattoni confirms Caldwell’s analysis.
“That’s a fact,” he says. By roping customers into a two or three year cycle, “you keep the wheel moving, and that’s why they thought of that.”
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.