As Auto Leasing Continues to Slow, Increasingly Targeted Marketing May Play Key Role in Maintaining Brand Loyalty
TransUnion study observes behavior of consumers with auto leases
The auto lease market continued to slow down for much of 2022 causing some automakers to lose traditionally loyal customers. A new TransUnion (NYSE: TRU) study found that the auto lease market was down almost half from 31% in January 2020 to 17% in July 2022, more than twice the decrease in auto financing over the same period.
The study examined the behavior of 3.8 million consumers who terminated a lease between July 2021 and June 2022. It included analyzing consumer segments based on subsequent auto credit activity and a review of relevant credit metrics. Additionally, the study examined make and brand loyalty for the next vehicle acquisition.
Results from the study showed a decrease in the number of consumers ending a lease who chose to lease again from July 2021 to June 2022, with only 25% of consumers doing so. This represented a 40% decrease since January 2020. The study also found that a larger proportion of consumers coming off of a lease were choosing to finance their next vehicles, despite the fact that this ultimately led to an average monthly payment increase of $217.
Increasingly, we are seeing consumers at the end of their auto leases choosing not to lease another vehicle, but rather, to finance a new car purchase or buy a car with no financing at all. While this may result in short-term gains for dealers, it has the potential to lower dealer profitability in the long-term due to longer consumer cycle times and can also negatively impact future off-lease used vehicle inventory and remarketing opportunities.
Customer Loyalty Under Pressure
Additional study findings showed that consumers are opting to end their leases earlier in the lease life-cycle than previously. For those consumers who ended their leases in the year 2022, 26% ended their leases six or more months prior to the lease’s expected termination date, an increase of nearly 63% since 2019. The study also showed that only 7% of lessees ended their auto leases two or more months after the expected lease termination date, down from 15% three years prior.
Consumers Are Ending Their Auto Leases Earlier in 2022 compared to 2019
6+ months prior
3-5 months prior
2 months prior
1 month before or after
2 months after
3-5 months after
6+ months after
X axis represents the month that consumers ended their leases relative to its expected end date; Source: TransUnion U.S. consumer credit database
Brand loyalty among consumers decreased significantly for consumers who chose a loan versus a lease for their next auto. Study findings revealed that lease-to-lease loyalty increased for both manufacturer and make since 2019, while lease-to-loan loyalty declined over that period. This could pose a challenge to captive lenders that rely on leasing as an effective way to keep consumers in the brand portfolio. Indeed, only 41% of households that went from a lease to a loan purchased a vehicle of the same make in the first seven months of 2022.
“It’s more important than ever that manufacturers and dealers keep existing lessees in lease products,” said Merchant. “The use of new marketing tools such as Neustar’s ElementOne® Analytics Platform can help dealers most effectively target and reach customers who may be interested in leasing or have leased a vehicle in the past, ultimately maximizing returns through smarter audience strategies and omnichannel marketing campaigns.”
To learn more about the findings of the study, visit here. More information on how TransUnion Marketing Solutions helps businesses confidently engage consumers with comprehensive identity and people-based marketing technology can be found here.
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing an actionable picture of each person so they can be reliably represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good®.
A leading presence in more than 30 countries across five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.