Increased vehicle production is likely to be accompanied by reduced consumer demand because of economic uncertainty, Yurchenko said.
The average new-vehicle loan initiated in the fourth quarter of 2022 carried a $717 monthly payment, up from $659 a year earlier, according to Edmunds. That’s $130 a month higher than the average lease payment for that period.
Some car loan payments have now approached levels once more on a par with mortgages or rent payments. A record 16 percent of borrowers in the last three months of 2022 agreed to pay $1,000 or more monthly on vehicle loans, up from 11 percent a year earlier.
“Affordability is going to be a growing issue,” Chesbrough said. Monthly payments are too high for “huge swaths of the population.”
While rising interest rates add to the cost of borrowing, Danny Battaglia, managing director of J.D. Power division ALG Customer Success, said higher rates don’t necessarily spur leasing. But rate hikes do increase the so-called money factor, the interest assessment on a lease. Automakers can still lower monthly lease payments by increasing the residual value on the paperwork, or the projected value of the vehicle at lease-end, Battaglia said.
Automakers are rebuilding their inventory levels at different paces. Chesbrough said the Detroit 3 are better positioned than Asian manufacturers, with some domestic-brand models back to 2019 inventory levels.
To meet their internal sales targets this year, some automakers will need to give customers a lower price point, Chesbrough said. Leasing can help.
“There may be a little bit more pressure to be a little bit more aggressive [on leasing] for the Detroit 3,” he said.
But all automakers face pressure to lower vehicle costs for consumers, Chesbrough added. The big question: Can they retain market share while keeping prices high and discounts low? And, should Ford Motor Co., General Motors and Stellantis slash prices, would Asian brands with less inventory hold the line?
Honda has lost share and could discount leases to regain it, Chesbrough said, but other Asian brands might keep leasing on a tighter leash.
Black Book expects growth in leasing “across the board” in 2023, Yurchenko said.
Jasmine Figueroa, finance director at Headquarter Hyundai, part of a Florida group that also has Mazda, Toyota and Honda stores, said she doesn’t foresee enough of an inventory rebound to support much in the way of lease deals this year.
“We are seeing more inventory throughout all the manufacturers,” Figueroa said. “But still, I don’t think it’s enough.”
