What is the leasing market?
The car leasing market is an alternative way for a business or individual to have access to a new car, without having the capital to afford to buy one.
Leasing a car is often viewed as a more affordable option than buying a car, mainly because you can select, within reason, the car you would like to drive, the cost of which is taken as a set monthly fee.
At the end of the lease contract (normally 3 years, depending on the age of the car) the car is replaced with a brand new model if the contract is renewed.
Is it a stable market?
Unlike owning a car, the leasing company takes the depreciation of the vehicle into account; as such there is no risk involved further down the line. This appeals to business owners as not only can tax liability be accurately forecasted, but there are also the economies of scale to be had with large fleets of lease cars.
It is widely predicted within the automotive industry that within the next 10 – 15 years leasing a car will be the norm, and the majority of us will be avoiding the expense of a new car to follow this trend.
Following on from this prediction, past market trends have shown that there is a slowing in the decline of the UK used car market. In comparison to the year on year drop in new car sales of 26.6%, the used car market only dropped 5.9% in the first half of 2010.
Over the past decade the UK used car market has grown a total of 7%, this is in spite of the negative media attention it attracts and inconsistent promotion by vehicle manufacturers.
According to these figures, the steady demand for used cars has assisted the franchised dealer networks to ride out a storm; this is before the long awaited scrappage incentive scheme came to the fore.
According to research firm Trend Tracker nearly four used cars are sold for every new one in 2010.
The effect on the leasing market
More than half of the new car demand is corporate; as such this change in purchasing behaviour has led to a change in tack from the leasing companies themselves. Holding onto the car after the 3 year contract is up is now being encouraged as this will help to combat the reduction in the number of contracts being available, as well as make an indent into the potential losses that would come from vehicle disposals.
So who is the target market?
Originally the domain of the corporations and big business, it is now becoming more and more common for the individual to choose a lease car. In the same instance the business clients haven’t dwindled, rather there has been a shift towards more economical and environmentally sound models.