Before the COVID-19 pandemic, a lease typically had about $1,500 to $2,000 negative equity at its end, and three-fifths of lease vehicles were returned rather than purchased, said Jeremy Robb, Cox Automotive senior director of market insights and business solutions.
But leased vehicles from the 2017 model year that matured in the U.S. COVID-19 ground zero year of 2020 were only underwater by an average of $990.
Lessees of 2018 models hit the jackpot, with a positive equity that reached as high as $9,705 in late 2021 and averaged $5,516 for the year.
Leases stopped ending up at auction, Robb told the Auto Finance Summit in Las Vegas in October. “They all dried up,” he said.
Either the customer or the dealership bought the vehicle at the end of the lease, he said.
Leased vehicles from the 2019 model year have averaged $7,970 in positive equity in 2022 through the week ending Nov. 12, according to Cox. Three-year leases of 2020 models maturing in 2022 have averaged $8,536 in that time.
However, equity has fallen as the year has progressed. Vehicle leases that matured in the week ending Nov. 12 on 2019 models returned $6,029 in positive equity, while 2020 model-year leases ending that week carried $5,598 in positive equity.
Robb said Cox felt the trend of off-lease vehicles failing to reach auction would continue until positive equity dropped to the $2,000 to $2,500 range on average.
Cook said he hadn’t seen lease contracts carry significantly higher residual values than before the used-vehicle market went “crazy,” despite the rise in positive equity.
“They’re up a little bit, but not nearly like everything else,” Cook said. “They’re pretty similar to three years ago.”
Robb said 3-year-old vehicle leases maturing today had been written at residual values of 56 to 58 percent of sticker, but three-year leases scheduled to end in 2024 and 2025 set 66 to 67 percent residuals. “The market’s moved up,” he said.
Cox also gave the conference a sense of equity trends within the loan market.
Robb showed data on 18-month-old auto debt with interest rates of 12 percent or higher, a segment chosen because of the likelihood of the vehicles ending up at auction after a repossession.
