Carmakers to compete over surge in off-lease customers next year

Article by Anita Panait, on December 3, 2013

A battle is looming between carmakers as they expect the number of vehicle owners coming off lease to surge in 2014. People who leased vehicles after the market rebound in 2010 and beyond are going back to dealerships in large numbers as their three-year leases expire. Carmakers are aiming to attract a big share of these new customers, who could provide a tail wind for continued US sales growth next year.

That could further extend the annual strings of US sales increases to five. "There is a tsunami of customers coming up," Jose Munoz, chairman of Nissan North America, told Automotive News in an interview. He remarked that the level of Nissan customers with leases ending next year is "coming back to pre-crisis mode, which is several times bigger" than the carmaker has had in the past years.

Leasing is growing thanks to low interest rates, easy credit and improving residual values – allowing carmakers to offer lower monthly payments while retaining profits. In the first nine months of 2013, leasing accounted for 23 percent of US new-car registrations, up from 13 percent for the entire 2009, according to data from Polk.

This comeback has resulted to a lag effect of lease customers going to showrooms in greater numbers. For instance, General Motors said that its volume of lease returnees started building this fall.

The carmaker expects lease maturities to reach 14,000 to 20,000 a month in 2014, after averaging 5,000 for most of 2013. The rise in off-lease customers provides a good opportunity for the carmaker to lock in some of their most loyal customers since lessees are more likely to remain with their brands.

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