US: leases prompt earlier car upgrades image

The US automotive market is growing steadfast, but automakers are increasingly worried that incentives would eat away their earnings, as the competition is today fiercer than ever.

So, carmakers from VW AG to General Motors are slowly braking incentive spending and in stead lure more customers with alternative finance plans. One such move is the drive towards auto leasing, which is making a definite comeback in the US.

“Like an iPhone, one can get a new vehicle with all the new technology and have a similar payment as before,” said Jessica Caldwell, an analyst for auto researcher

“Thirty years ago, if you rolled up next to someone riding in a BMW or a Porsche and you said ‘that car is leased,’ it was one of the biggest insults you could throw at someone,” said Mark Wakefield, a managing director at AlixPartners LLP. “Now, you’d say, ‘Yeah? So, what?’”

The leasing rise in the US is also integral to the power up in sales, as leases tend to be far more affordable than loans. The lenders also helped spur demand for this financial aid by extending the loan terms to as much as eight years. According to Experian Automotive, in the first quarter alone 25% of all leases were of 73 to 84 months.

Via Bloomberg