Association of Consumer Vehicle Lessors
Lease Volume Down 40% in 2001
For Immediate Release
| Contact: | Jesse Bragg |
| President, ACVL | |
| 615/467-1900 |
Nashville, TENNESSEE. September 26,
2002. After peaking in 1999 and
declining slightly in 2000, new lease volume for the largest national lessors
plunged 40% in 2001. The Association of
Consumer Vehicle Lessors announced today that member lessors reporting both
2000 and 2001 volume had a total reduction in new leases from 2.57 million to
1.55 million. The average (unweighted)
decline per lessor was 35%, indicating that the largest lessors experienced a
slightly higher decline in new lease bookings than did the medium size
lessors. Bank lessors saw their volume
decline 47%, compared to 38% for manufacturer captive finance companies. (See Exhibit 1.) “There were a number of factors contributing to lower lease
volumes,” explained Jesse Bragg, ACVL President, “including the 0% manufacturer
loan promotional rates and other very low interest rates, lower residual values
(causing higher monthly payments), fewer manufacturer lease promotions, and the
retraction of some bank lessor programs by withdrawing from some states and/or
being more selective in approving lease applications.”
|
2000 - 2001 New Lease Volume |
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2000 |
2001 |
# Diff. |
% Diff. |
Avg. Unweighted New Lease Change |
n |
|
All Respondents |
2,566,090 |
1,547,926 |
-1,018,164 |
-39.68% |
-35.11% |
12 |
|
Banks |
547,805 |
291,090 |
-256,715 |
-46.86% |
-42.28% |
5 |
|
Captives |
2,018,285 |
1,256,836 |
-761,449 |
-37.73% |
-29.98% |
7 |
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Note: includes only respondents participating in
both years. |
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Seventeen of the twenty ACVL
members, which include banks, automobile manufacturer and distributor finance
companies, and independent finance companies, participated in the study. The data were compiled showing the results
for three groups: large lessors (the largest eight respondents); medium-size
lessors (the other nine respondents) and all seventeen respondents. The survey data were compiled and tabulated
by Bank Lease Consultants. Although not
all of the largest ACVL members participated in the 2001 survey, the survey
still presents a comprehensive overview of the leasing policies and results
that dominate the marketplace.
Approval and booking efficiency increased. The booking rate of all
applications[1] edged up
from 70 percent in 2000 to 71 percent in 2001.
Although the average booking rate of applications increased slightly, on
an unweighted average the booking rate fell slightly from 64% to 63%. This was due to a four percentage point drop
for medium lessors from 62% to 58%.
Thus, the largest lessors expanded their application efficiency
advantage in 2001.
End-of-term residual losses increase
reflecting the weak used car market. End-of-term
residual losses of ACVL member lessors increased in 2001, largely reflecting
the weak used car market after September 11, 2001. However, from the perspective of consumers, those who leased
their vehicles enjoyed savings at lease- end of more than $2,400 on average
compared to those who purchased and traded their vehicles in 2001. On an unweighted basis in which each
lessor’s portfolio is treated equally, the percentage of returned vehicles
resulting in losses remained at 92 percent in 2001. (See Exhibit 2.) The average loss per returned vehicle for
the typical lessor (including the gain vehicles) jumped from $2,281 in 2000 to
$2,661 in 2001. However, the weighted
average loss was slightly less than the unweighted average loss, indicating
that the lessors with the largest volume had lower losses than the lessors with
smaller volume. The weighted loss per
returned vehicle increased from $2,212 in 2000 to $2,429 in 2001.
|
|
1998 |
1999 |
2000 |
2001 |
2000 - 2001 Difference |
Percentage of EOT Returned Vehicles Resulting in Residual Loss |
75% |
86% |
92% |
92% |
0% |
|
Unweighted
Average Residual Loss per EOT Returned Vehicle |
$1,258 |
$2,209 |
$2,281 |
$2,661 |
17%* |
|
Weighted
Average Residual Loss per EOT Returned Vehicle |
$1,672 |
$2,592 |
$2,212 |
$2,429 |
10% |
* Unweighted increase for all participants.
Although this result was bad news for lessors, consumers
whose leases ended in 2001 came out far better than those who had purchased
their vehicles since the residual value used in the leases that ended in 2001
was more than $2,400 greater than the actual trade-in values of the
vehicles. Thus, consumers who leased
saved an average of more than $2,400 compared with those who bought their
vehicles in the same year, the study revealed.
The percentage of vehicles reaching lease end that were
returned to the lessor also increased slightly from 50 percent in 2000 to 58
percent in 2001, so more leases ended with residual losses. As was the case in 2000, the 2001 end-of-term
return rate for medium lessors again was higher than for large lessors: 62 percent compared to 53 percent. Higher average residual losses cause higher
return rates, so the overall increase is to be expected.
Credit quality is consistently high. The 2001 ACVL Lease Survey also
reports credit quality based on the credit bureau score distribution of funded
leases. Although there is a wide
distribution of scores in new vehicle leasing, 66 percent of respondent leases
(unweighted) had credit bureau scores greater than 680 compared to 63 percent
in 2000. The proportion of leases with
credit bureau credit scores exceeding 720 increased slightly from 41 percent in
2000 to 45 percent in 2001. The average
new vehicle credit bureau score was 704.
The survey also reports on the percentage scorecard approvals and
scorecard overrides.
Credit losses jumped 83% in 2001. Despite the high credit
quality of leases written in 2001 and in past years, the weak economy in 2001
and the particularly weak used car market caused a large jump in credit losses.
Net credit losses (after recoveries)
increased from 48 basis points in 2000 to 88 basis points in 2001. The increase was the result of increases in
both the loss per repossession and the frequency of repossessions. The gross repossession loss jumped to $8,080
in 2001, a 32% increase over $6,101 in 2000.
The annualized repossession rate was 1.72% (as a percentage of accounts)
compared to 1.36% in 2000 (a 26% increase) and 1.79% (as a percentage of
dollars) compared to .77% in 2000 (a 132% increase).
Consumers and dealers get quick credit
decisions. Fifty-six
percent of all lease applications received credit decisions in 30 minutes or
less in 2001 compared to 54% in 1999.
Large lessors were somewhat faster than medium lessors.
Lease terms increased substantially.
Accelerating a trend that began in 1998, average lease terms jumped by 2
months in 2001 from 39.3 months to 41.3 months. “In the last four years, the market has almost totally switched
away from 24-month leases. The
manufacturer captive lessors’ average term was over 41 months (compared to
their weighted average of 38.1 months) indicating that most captives are
writing almost as many 48-month leases as 36-month leases. For banks, the average term of 53 months
indicates that the 60-month term has surpassed the 48-month term in
popularity,” said Bragg.
Illustrating the substantial difference based on lessor
size, the unweighted average lease term in 2001 was 46.8 months, more than 5
months longer than the weighted average.
From 1997 to 2001, the weighted average lease term has increased 9
months and the unweighted average has increased 8.2 months. (See Exhibit 3.)
|
|
1997 |
1998 |
1999 |
2000 |
2001 |
2000-2001 Difference |
1997 – 2001
Difference |
|
Weighted
Average Lease Term |
32.3 |
36.5 |
37.1 |
39.3 |
41.3 |
2.0 |
9.0 |
|
Unweighted
Average Lease Term |
38.6 |
40.7 |
41.3 |
44.5 |
46.8 |
2.3 |
5.9 |
|
Difference |
-6.3 |
-4.2 |
-4.2 |
-5.2 |
-5.5 |
N/A |
N/A |
Security deposits are another area where lessor policies
are changing rapidly. A few years ago,
security deposits were so commonplace that they were collected in virtually all
leases. 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 are the exception rather than the rule, being assessed
in only 35% of the leases of the average lessor.
The ACVL Lease Survey is a
comprehensive statistical overview of the 2001 vehicle leasing industry. It is thus a valuable data source for
understanding the evolution of the vehicle leasing 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: ACVL.COM.