SUV, Truck Leases Drive 2016 New-Car Sales Record, Edmunds Report Finds | Edmunds

SUV, Truck Leases Drive 2016 New-Car Sales Record, Edmunds Report Finds

Spearheaded by leases of SUVs and trucks, lease volume grew for the seventh consecutive year in 2016. The trend toward leasing also helped drive record new-car sales last year, according to Edmunds' 2017 Lease Market Report.

As previously reported by Edmunds, shoppers scooped up 17.5 million new vehicles in 2016, topping the previous year's sales figure, also a record, by 0.3 percent. And pickup trucks, SUVs and vans accounted for 60 percent of those sales, another record high.

With SUV prices generally higher than those of cars, leasing provides an attractive way for consumers to get into these vehicles. As a result, SUV leases have been on the rise for a number of years, and in 2016, lease volume grew to 1.9 million units, with the SUV lease penetration rate increasing to 32 percent. As a result, last year SUVs outsold passenger cars for the first time in history.

Pickup truck leases also continued their upward swing in 2016. Although not as dramatic as the SUV increase, 15 percent of trucks were leased last year, compared to 14 percent in 2015.

"Leasing has long been the gateway for car shoppers who are looking to get a nicer vehicle than they could if they financed," said Jessica Caldwell, Edmunds executive director of industry analysis. "Because SUVs and trucks are holding their values so well right now, it makes them much more accessible for a much wider swath of the market, further fueling their popularity."

Car leases, on the other hand, are on the decline. As the report notes: "With gas prices low and fuel efficiency improved, consumers are flocking to pickups and SUVs."

Overall, lease volume reached an all-time high of 4.3 million units in 2016, capping a five-year period over which leases have grown by 91 percent. The attraction for shoppers is clear: On average, lease payments in 2016 were $120 per month less than the average monthly finance payment. And for large pickups, which traditionally have high residual value, the difference is even more dramatic, with lease payments averaging $206 less than a monthly purchased payment.

Among major brands, every nameplate except Mitsubishi has experienced an increase in lease penetration over the past five years, Edmunds found. The least amount of growth was for the large Japanese brands, especially Honda and Nissan, which already maintained a high percentage of leasing. The most growth came from SUV and truck brands, including GMC, Land Rover and Ram, as leasing allowed more consumers to move into these vehicles.

Regionally, there are significant differences in lease rates. For example, the tri-state area of Connecticut, New Jersey and New York has a lease rate of more than 45 percent, while many states in the Southeast have lease penetration rates of less than 10 percent. The state with the highest lease penetration rate in the U.S. is Michigan, the home of the domestic auto industry. Overall, the center of the country has experienced the highest increase in leasing over a five-year period.

Proportionally, the millennial generation leases more than any other age group in the U.S., according to the report. Millennials lease the most trucks and SUVs, helping drive the popularity of leasing these vehicles. Even though they account for only 12 percent of all leases, nearly one-third of millennials who acquired a new vehicle in 2016 did so by leasing. On the other hand, those with the lowest rate of leasing are the 55-64 and 65-74 age groups.

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