The leasing surge, consumer powertrain preferences, Ford/GM hybrid approaches

May 31, 2024

Hey everyone. In case you missed it, I sent out another deep dive to my newsletter subscribers yesterday, breaking down the return of incentives.

Basically, automakers are forking over deals we haven’t seen in quite some time — find out why.

— CDG

1.  A look inside the leasing comeback

Big picture: Increased vehicle inventory has fueled a significant rise in new car leases. In Q1, leases accounted for 24.12% of all new car financing. That's up 19.33% year-over-year, according to new data from consumer credit reporting company Experian. 

What’s more: The average monthly payment for a new lease is slightly less expensive, dropping $7 compared to the previous year and reaching $595 in Q1. 

  • The average monthly payment for a new lease is $140 lower than a traditional loan.

Why it matters: Over 13.6% of all new payments (loan and lease combined) are over $1,000 before insurance — a heavy lift for the majority of consumers. Leasing provides lower monthly payments than traditional financing methods. Saving nearly 20% on a monthly payment is necessary for many car buyers, given the double-whammy of high interest rates and inflation.

Key quote: “The return of new vehicle inventory has had a ripple effect across the automotive finance market,” said Melinda Zabritski, Experian’s head of automotive financial insights. “Not only are we seeing in-market shoppers transition away from the used vehicle market but we’re starting to see the resurgence of leasing.”

By the numbers: 

  • Super Prime and Prime+ car buyers (the groups with excellent credit scores) chose to lease over 30% of the time.

Top 3 leased new makes:

  1. Honda (11.75%)

  2. Toyota (8.34%)

  3. Chevrolet (7.18%)

  • Nissan, BMW, Ford, and Nissan exceeded 5% of leased new brands.

  • SUVs took the lion’s share of the top leased vehicles in Q1 2024.

  • The Honda CR-V clinched the top spot at 3.12%, followed closely by the Tesla Model Y at 2.69%. Rounding out the most-leased list were the Nissan Rogue (2.35%), Chevrolet Equinox (2.21%), and the Honda Civic (2.02%).

The intrigue: Car buyers are leasing EVs at a higher rate than in previous years.

  • Leasing made up 35.22% of EV financing in Q1, an increase from 12.27% year-over-year.

  • The average payment difference between an EV lease and a loan is $88.

The reason: Under the new EV tax credit rules, leasing might allow car buyers to claim the full tax credit, even if the specific car wouldn't qualify if purchased through other financing means.

The difference: Leased vehicles are considered "commercial" under these rules, skipping some restrictions on purchased EVs. 

Of note: When a car is leased, the driver does not own it. They are essentially renting it for a set time with a mileage limit.

Key quote: “With more manufacturers rolling out a diverse range of EV models and a wider availability of tax incentives, we’re seeing consumers lean into the EV market, particularly with leasing,” Zabritski continued. “As technology evolves and infrastructure continues to develop, it’ll be interesting to see the buying preferences for these consumers once they come off lease.”

Bottom line: In 2019, leasing was an attractive option. It let most consumers commit to a lower monthly payment if they didn't mind the stipulations. Today, vehicle prices are dropping. But they are still near record highs. So, leasing is a much-needed necessity for consumers.

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2. Gas-powered cars favored over EVs, hybrids – survey

Top line: Even when price and features are equal, most Americans prefer gas-powered cars over EVs or hybrids according to a new survey of 1,100 consumers.

Key data:

  • Only 20% of Americans surveyed would choose an EV over gas or hybrid.

  • Nearly 38% opt for gas vehicles.

  • Hybrids capture the remaining interest (34%).

Driving the news: A clear majority (60%) of Americans want an 80% charge for their EVs in just 20 minutes or less. However, only 41% of auto executives believe this is crucial (current average charging times take 20-60 minutes). 

  • Currently, only 20% of EV models sold are capable of achieving an 80% charge in under 20 minutes using the fastest chargers the vehicle is rated for.

What’s more: Almost 6 out of 10 (58%) are not willing to pay extra for self-driving technology.  

  • 55% of consumers say they will not pay extra for in-vehicle entertainment such as streaming services, movies, and game packages.

  • Instead, they value safety features they can use now, with 71% willing to pay extra for advanced safety systems like lane-departure warnings.

The takeaway for the auto industry is clear — prioritize what matters most to consumers, like affordability, practicality, and faster charging.

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3.  Ford, GM CEOs share differing views on hybrid vehicles

What's happening: Ford CEO Jim Farley and GM CEO Marry Barra each took the stage at the Bernstein annual strategic decisions conference to share their perspectives on long-term powertrain strategy.

  • Ford: Farley wants the industry to see hybrids as more than a temporary solution before full EVs. Ford is even delaying some EV investments in North America.

Key quote: "I think we should stop talking about it as transitional technology on the powertrain side. It's 25 years old now," said Farley

"Many of our hybrids in the U.S. are now more profitable than their non-hybrid equivalent," he added.

  • GM: CEO Mary Barra sees EVs as the ultimate destination, acknowledging hybrids' limitations on emissions.

Key quote: "[Hybrids are] not the end game because [they're] not zero emission," Barra said.

"We're trying to be very smart about how we do that and how we deploy capital there," she added.

More to the story: Recent booming hybrid sales are causing some automakers to reconsider their electrification plans.

2024 Ford Maverick

  • Hybrid sales at Ford Jumped 47% in the first four months of 2024, with the Maverick and F-150 hybrids reporting strong numbers.

  • 20% to 25% of new F-150 pickups built are hybrids, a sharp increase from 10% last year.

  • GM plans to bring back plug-in hybrid vehicles to its lineup by 2027, according to an interview with Barra.

  • But the automaker is still committed to an all-electric future in the long term. GM recently introduced the Chevrolet Equinox EV, an affordable all-electric SUV with a 319-mile range. The retail version of the Chevrolet Silverado EV is now available at dealer lots.

The road ahead: Can Ford's profit-driven hybrid strategy work long-term? Or will GM's all-in bet on EVs pay off as battery technology advances?

Have a tip for our editorial team? Send us your scoop at [email protected].

  • Tesla is recalling (via OTA update) 125,227 vehicles in the United States due to a malfunction in its seat belt warning system.

  • Usage of auto manufacturers’ mobile apps continues to increase.

  • During the week that closed two days before Memorial Day, Black Book watched wholesale values soften another 0.15%.

  • GM claims its new Chevy Bolt EV will be the most affordable on the market by 2025.

  • China is set to invest about $828 million to boost the development of a more powerful and advanced type of EV battery tech.

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Thanks for reading everyone. Have a great weekend.

— CDG

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