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More Lessees Plan to Buy Their Existing Leased Model

August 28, 2008

Roughly 17 percent of vehicle lessees will buy their existing leased model, compared with just more than 10 percent who said the same a year ago, according to a CNW survey of more than 11,000 lessees.

Meanwhile, 21.78 percent of of those questioned plan to buy a new vehicle on a long-term contract, versus 13.59 percent in 2007, according to the survey, which questioned lessees whose leases are coming to an end this year. 

Also, the amount of lessees looking to purchase used models rose from 3.11 percent to 7.32 percent over last year. However, only 27.82 percent of those questioned will likely lease from another automaker. In 2007, 48.76 percent intended to do the same.

Art Spinella, president of CNW, said that while some business will be lost because of lessor drop-outs, as the survey data shows, it is just as likely to drive former and current lessees to another brand rather than convert them to finance customers.
Reflecting the decline in the amount of truck leases, leased vehicles' total value as a share of all vehicles' value came in at 26.45 percent in July, compared with 30.77 percent a year ago, according to CNW. 

Grave problems remain in the leasing industry, according to CNW. The company pointed to the $5 billion in underestimated residual values this year for end-of-term SUVs. There could be another $5 billion and $4.5 billion in 2009 and 2010, respectively, officials projected. 

Spinella, however, said that the leasing "remains not only viable, but strong."

"Consumers have a desire for contract terms shorter than the current finance average of 70 months," he said. "In fact, measured monthly, the preferred term is a tad over 42 months. Lessees, like car buyers, also prefer a short-term contract — about 40 months." 

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