Auto Lease Volume Down Another 7% in 2002

NASHVILLE, Tenn., Sept. 12 -- The Association of Consumer Vehicle Lessors announced today that member leasing companies reporting both 2001 and 2002 volume had a total reduction in new leases from 2.02 million to 1.89 million. This modest 6.8% 2002 volume decline shows that leasing activity has almost stabilized. However, since the peak of leasing in 1999, leasing volume has fallen 42.6%.

The 2002 decline is due entirely to reduced captive volumes: total bank leases increased slightly: 0.6%, while all captive volume was down 8.5%.

"There were a number of factors contributing to lower lease volumes," explained Rob Mize, ACVL President, "including the expansion of the 0% retail installment programs and other similar manufacturer installment sale promotions, continued declines in residual values (causing higher monthly lease payments that make leasing less competitive compared to financing), and fewer manufacturer subvented lease programs."

ACVL members also reported that their end-of-term residual losses increased somewhat in 2002. Residual losses increased to $3,269 in 2002 from a weighted average of $2,961 in 2001, a 9.4% increase. While the increased residual loss level was an unwelcome development for lessors, consumers who leased reaped the substantial benefit by having lessors absorb these increased losses.

Put another way, consumers whose leases ended in 2002 came out far better than those who had purchased their vehicles since the residual value used in the leases that ended in 2002 was more than $3,200 greater than the actual trade-in values of the vehicles. Thus, consumers who leased saved an average of more than $3,200 compared with those who bought their vehicles in the same year, the study revealed.

"Now more than ever, it's important that consumers be informed about the benefits and responsibilities of leasing before they decide whether to lease or buy," said Mize.

The ACVL survey highlights a number of areas in which bank and captive vehicle leasing programs differ. The average lease term of bank lessors was 50 months in 2002, compared to slightly less than 40 months for captive finance company lessors. The average booking rate of applications received for captives was 72% compared to 51% for banks. On the other hand, the average bank lessor was more selective on credit with 86% of new leases having a credit bureau score above 680 (a standard measurement of a "strong" credit applicant). Captive Finance companies, which support vehicle sales of their manufacturing partner, had 60% of leases over that same threshold.

Security deposits continued to disappear. A few years ago, security deposits were so commonplace that they were collected in virtually all leases. In response to consumer preferences, this began to change in the late 90's. In 2001, for the first time lease security deposits became the exception rather than the rule, being assessed in only 35 percent of the leases of the average lessor. This trend continued into 2002: only 22 percent of leases booked had security deposits. Banks reported that just 7.7% of leases had security deposits versus 32.7% for captives. The decline in security deposits is in response to consumer requests to minimize upfront lease costs. Many members accommodate that consumer preference but charge higher rates or acquisition fees when security deposits are waived.

"A major part of our mission at ACVL is to provide consumers with the information they need to make informed decisions. Our Web site -- www.acvl.com -- is a good place to start for those who want to consider leasing among their options," noted Mize. A more complete review of the survey is available on the site.

ACVL has conducted its annual member lease survey since 1993. ACVL members account for approximately 80% of all consumer vehicle leasing in the U.S.