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For many, if not most, consumers coming out of leases over the last two years, sky-high used-vehicle prices and low incentives meant that the cheapest replacement vehicle to buy was the one they’d already been driving, explained Tyson Jominy, vice president of data and analytics at J.D. Power. That was especially true if those consumers had their driving or commuting habits curtailed by the pandemic, leaving them significantly under-miled compared with the lease residual levels they had agreed to three years earlier, before the pandemic began. Many simply bought out their leases and kept their vehicles, or bought them out at the residual price and sold them in the current inflated market, pocketing the difference.
But those traditional lease customers — especially in luxury segments — who took advantage of their good fortune and bought their cars outright “may be in for a nasty surprise,” Jominy warns.
“During [COVID], a lot of consumers that have shifted over from leasing to buying have never known a day of maintenance in their lives, let alone the costs of luxury repair, and I do think there’s a bit of risk there,” he said. “Those luxury consumers tend to be pretty happy because they don’t know any of the bad things of owning a luxury car; they’ve never experienced it.”
But that is likely to change when they’re on the hook for the basic maintenance trip that can easily run into the hundreds of dollars.
Leasing’s biggest value to the industry is something that most consumers rarely think about: control. Leasing gives automakers, lenders and dealers the ability to entice their consumers to return to the dealership at a time largely of the lessor’s choosing. Consider that a lessor knows before any of its competitors when a lessee will return to the market for a new vehicle and as a result can target marketing resources very efficiently to get them back into another vehicle.
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