Association of Consumer Vehicle Lessors
Lease Volume Down Another 7%
in 2002
For Immediate Release
Contact: Rob Mize
President, ACVL
615/467-1900
Nashville, TENNESSEE. August 26, 2003. The Association of Consumer Vehicle Lessors
announced today that member leasing companies reporting both 2001 and 2002
volume had a total reduction in new leases from 2.02 million to 1.89 million. This modest 6.8% 2002 volume decline shows
that leasing activity has almost stabilized after a 39.7% decline in 2001. (See Exhibit 1.)
The 2002 decline is due entirely to reduced
captive volumes: total bank leases
increased slightly. However, not all
banks had stable or increased volumes.
The average bank had 19% fewer new leases indicating that it was
principally the larger bank programs that grew. The opposite was true for the captives. While all captive volume was down 8.5%, the average volume of new leases declined only 2.9% indicating that the
larger captives had bigger declines than the smaller ones.
“There were a number of factors contributing
to lower lease volumes,” explained Rob Mize, ACVL President, “including the expansion
of the 0% retail installment programs and other similar manufacturer
installment sale promotions, continued declines in residual values (causing
higher monthly lease payments that make leasing less competitive compared to
financing), and fewer manufacturer subvented lease programs.”
|
2002 Lease Volume Compared to 2001 |
||||||
|
|
2001 |
2002 |
# Diff. |
% Weighted Difference |
Avg. Unweighted New Lease Change |
n |
|
All Respondents |
2,023,777 |
1,894,566 |
-129,211 |
-6.8% |
-9.6% |
17 |
|
Banks |
344,538 |
346,714 |
2,176 |
0.6% |
-19.0% |
7 |
|
Captives |
1,679,239 |
1,547,852 |
-131,387 |
-8.5% |
-2.9% |
10 |
|
Note: includes only respondents participating in
both years. |
|
|
||||
All ACVL members, including the principal automobile manufacturer and
distributor finance companies, and banks, participated in the 2002 study. The data were compiled showing the results
for two groups: largest lessors (the largest eight respondents) and other lessors
(the other ten respondents), as well as the combined results of all ACVL member
companies. The survey data were compiled and tabulated by Bank Lease
Consultants. ACVL member
companies account for approximately 85% of all consumer vehicle leases in the
country. Thus, the 2002 survey presents
a comprehensive overview of the leasing policies and results that characterize
the marketplace.
Approval and booking efficiency increased. The unweighted booking rate of
all applications increased from 63% to 64%. This was primarily due to a five percentage point increase in the
average booking ratio for the largest lessors, which went from 68% to 73%. However, the weighted booking ratio for all
lessors declined slightly from 71% to 70% indicating that the largest lessors
showed a decline while the other lessors in the “largest lessor” category
improved their efficiency. The unweighted average booking rate of captives was
72% versus 51% for banks.
End-of-term residual losses increase
reflecting the weak used car market. ACVL members
reported that their end-of-term residual losses increased somewhat in
2002. Residual losses increased to $3,269 in 2002 from a weighted average
of $2,961 in 2001, a 9.4% increase. While
the increased residual loss level was an unwelcome development for lessors,
consumers who leased reaped the substantial benefit by having lessors absorb
these increased losses.
Reduced
used car values, in turn, caused continued declines in new lease residual
values, which, as noted, helped cause the decline in lease volume. On an unweighted basis, the percentage of
returned vehicles resulting in losses decreased to 92 percent in 2002 from a
recorded high of 97% in 2001. (See Exhibit 2.)
|
|
2001 |
2002 |
2001 - 2002 Difference |
Percentage of EOT Returned Vehicles Resulting in Residual Loss |
97% |
92% |
-5.2% |
|
Weighted
Average Residual Loss per EOT Returned Vehicle |
$2,961* |
$3,269* |
9.4%* |
* Weighted average for only respondents participating in both 2001 and
2002
The
percentage of vehicles reaching lease end that were returned to the lessor declined
slightly in 2002 to 57% compared to 58% in 2001. Higher average residual losses generally cause higher return
rates, so the stability in return rates is welcomed news in the industry.
Credit quality is consistently high. Although there is a wide
distribution of credit scores in new vehicle leasing, on an unweighted basis,
71 percent of new lessees had credit bureau scores greater than 680 in 2002 compared
to 66 percent in 2001. Banks reported that 86% of new vehicle leases had scores
greater than 680, compared to 60% of captives.
The proportion of leases with credit bureau credit scores exceeding 720
increased slightly from 45 percent in 2001 to 50 percent in 2002. Again, banks had a larger percentage, 59%,of
new leases with scores greater than 720, compared to 44% of captives .The
average credit bureau score for new vehicle lease applications was 709 in 2002,
up from 704 in 2001. The survey also
contains information on the percentage of overrides of scorecard declines and
approvals.
Credit losses remain stable. Net credit losses in 2002 on
an unweighted basis averaged 87 basis points, virtually identical to the 88
basis points reported in 2001. Banks
and captives had virtually identical net credit losses. This stability in a worsening economy
reflects the high underwriting standards of member companies. The average gross repossession loss climbed
to $8,514 in 2002 from $6,061 in 2001, representing a 40 percent increase due
to weaker used car values. Captives reported average gross losses of $8,085. However,
this precipitous increase was offset by a decline in the annualized
repossession rate to 1.47% as a percentage of dollars in 2002 (1.42% by
captives) compared to 1.79% in 2001 (on an unweighted basis).
Credit decision speed continued to
increase. As a
result of continued automation of the credit approval process, 63 percent of all lease applications received
credit decisions in 30 minutes or less in 2002 compared to 56 percent in 2001
on an unweighted basis. Results were
identical for banks and captives.
Lease terms stabilized. After several years of increasing lease terms, the weighted
average term of all leases written stabilized in 2002 at 41.4 months. For the average lessor, the average term
declined 0.3 months indicating that some of the smaller respondents had reduced
terms while the largest lessors continued to have small increases. (See Exhibit 3.) “In the last five years, the market has almost totally switched
away from 24 and to a lesser extent, 36 month leases to more 48 and 60 month
terms,” said Mize. There was a big
difference in the average lease term of captives and banks. The manufacturer captive lessors’ average
term was 39.6 months, 10.2 months less than the 49.8 month average for bank
lessors.
|
|
1998 |
1999 |
2000 |
2001 |
2002 |
2001-2002 Difference |
1998 – 2002
Difference |
|
Weighted
Average Lease Term |
36.5 |
37.1 |
39.3 |
41.3 |
41.4 |
0.1 |
4.9 |
|
Unweighted
Average Lease Term |
40.7 |
41.3 |
44.5 |
46.8 |
46.5 |
-0.3 |
5.8 |
|
Difference |
-4.2 |
-4.2 |
-5.2 |
-5.5 |
-5.1 |
|
|
Security deposits continued to
disappear. The requirement for a security deposit
has changed significantly in recent years.
A few years ago, security deposits were so commonplace that they were
collected in virtually all leases. In
response to consumer preferences, this began to change in the late 90’s. By 2000, ACVL members reported that only 52
percent of leases (on an unweighted basis) had security deposits. In 2001, for the first time lease security
deposits became the exception rather than the rule, being assessed in only 35
percent of the leases of the average lessor.
This trend continued into 2002:
only 22 percent of leases booked had security deposits. Banks reported that just 7.7% of leases had
security deposits versus 32.7% for captives.
The decline in security deposits is in response to consumer requests to
minimize upfront lease costs.
The ACVL Lease Survey is a
comprehensive statistical overview of the 2002 vehicle leasing industry. It is a valuable data source for understanding
the evolution of the industry.
The ACVL was founded in 1993. Based in Nashville, Tennessee, the ACVL is a national trade association for the largest manufacturer and import distributor captive finance companies, banks, and independent leasing companies whose primary goals include increasing consumer understanding of lease benefits and responsibilities through improved disclosure. For information on purchasing the Survey, please contact the Association of Consumer Vehicle Lessors at 615/467-1900. Further information about the ACVL and consumer vehicle leasing may be found on the Association’s web site: http://www.acvl.com.