All sorts of car-buying dynamics changed as a result of the pandemic. The way drivers acted when their car leases ended is no exception.
For more than two years, car-buyers faced low vehicle inventory and high new and used car prices. They might have gone to a dealershipand not been able to find what they wanted, or paid more than they wanted for something that had fewer features than they needed.
As a result, many consumers with ending leases decided to buy out their cars instead of returning them and facing the markups and limited options of a strapped market.
Plus, a portion bought their car hoping to earn a nice chunk of change if they flipped it quickly, given how much the vehicle might have appreciated.
In general, a lot of folks who would have turned their leased vehicles back in, didn't, and leasing habits continue to shift. In 2025, there will be 30% fewer lease maturities (or vehicles coming off a lease contract) than in 2022, according to Cox Automotive estimates. That's about 1.1 million fewer cars entering the used market.
In 2019, about 30% of all new vehicle retail sales were leases versus being bought outright. Now it's closer to 15 to 20%, Cox senior economist Charlie Chesbrough said at a recent Federal Reserve Bank of Chicago annual auto insights symposium in Detroit. All of those dynamics, combined with high used vehicle prices, spell trouble.
"All of this really means that the normal supply feeds into the used vehicle market are down substantially," he said. "This is going to have huge ramifications for the used vehicle market over the next couple years."