The Coronavirus or COVID-19 has impacted the global economy in an unprecedented way and the impact has not exclude the car lease, lease takeover, or lease swaps market. Similar to most segments, this industry took a hit when the world went into lockdown in March 2020. But the industry adapted and is on its way to bouncing back. Read on to find out about the changes that were made by the dealers and financers, the short-term boom in lease swaps, and the projected market growth into 2021 and beyond.
What happened early on
As the world adapted to the changes, dealers and lessors took measures to protect the public from the spread of the virus by taking measures such as wrapping seats sanitizing the car before and after every client and moving to contactless delivery. Many of these measures continue to stay in place through the second and third wave of the virus.
However, these measures were not enough to convince the market to take on a new car lease as many individuals faced job uncertainty and a shorter or no commute to work which meant that they were less inclined to lease cars. Existing leaseholders were faced with the option of continuing with lease payments, turning in the car at a hefty penalty, or requesting a break from the scheduled payments to lessen the financial burden of their vehicle. All scenarios combined contributed to a radical slowdown of the lease business.
Additionally, it became harder to obtain approval on loans from financial entities due to the economic downturn and those who were able to obtain financing found themselves facing a supply chain bottleneck as manufacturing plants dealt with a backlog of orders.
The summer boom
Before long, leaseholders turned to lease takeovers or lease swap markets to find eager buyers who were looking for a bargain. Those who could not afford to make lease payments and faced hefty fines for terminating their lease early turned to sites such as carleasetakeover.ca to hand over their lease to someone who was perhaps not able to obtain a lease directly from the dealer or was looking for a bargain. This resulted in an increased activity of up to 71% on some lease takeover websites.
The public’s hesitation to use shared vehicles or ride shares also contributed to the increased demand for used-car leasing for a safer and more private commuting experience.
In the long term
So where do we go from here? Will the lease swap market continue to be hot and will the demand for car leases increase? Or will the industry have a negative growth rate going forward?
According to recently published data from Research and Markets, “the global automobile rental and leasing market is expected to decline from $366.9 billion in 2019 to $239.6 billion in 2020 at a compound annual growth rate (CAGR) of -35%.” This decline is expected and is a result of the global economic slowdown due to the pandemic and the lockdown efforts surrounding it. In other words, this forecast should not and does not come as a shock to anyone. However, analysts project that the market will recover and in fact grow at a rate of 15.06% from 2021 to 2023. It appears that there is light at the end of the tunnel!
Without surprise and given the changes brought about by COVID-19, online transactions are expected to pick up by 9.1% annually as the world adapts to the new normal. This means that you can expect to see more lease swaps on our website, where the reality of leasing your dream car is only a few clicks away.
The report digs a bit deeper into the different segments of the rental and lease market and predicts that the passenger car leasing segment in particular will grow at a rate of 6.2% in the next 3 years.
There is additional differentiation between the two types of automobile leases: open and close (if you are not sure of the difference between the two types, keep your eyes on our blog for an upcoming post explaining the difference), “the top opportunities in the automobile rental and leasing market segmented by type of lease will arise in the open segment, which will gain $40.6 billion of global annual sales by 2023.”
Despite the uncertain nature of these predictions, these forecasts are optimistic and are keeping us hopeful at carleasetakeover.ca.
What are your projections about the future of the lease market? Do you agree or disagree with the published analysis? Let us know in the comments below!