U.S. auto leasing decline extends as higher payments reshape new-vehicle financing

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U.S. auto leasing decline

Highlights

Leasing accounts for 23% of new car deals in H1 2026, still below the pre-pandemic 30% share, per JD Power.
Automakers reduced lease subsidies and raised monthly payments, with average lease at $650 versus $800 for financed vehicles, squeezing lease appeal.
Edmunds reports 43% increase in average price of three-year-old used vehicles since pre-pandemic as declining off-lease volume tightens used-car supply.

Leasing economics shift for buyers and automakers

As reported by Reuters, leasing now accounts for 23% of new car deals in the first half of 2026, still below the roughly 30% share seen before the pandemic, according to JD Power. The share fell as low as 17% during post-pandemic vehicle shortages, and the market has yet to fully recover.

Dealers and industry executives say customers still want to lease, but many are balking at sharply higher monthly payments when their current terms end. David Ferraez, a General Motors dealer in New Jersey, says the main obstacle is persuading shoppers to accept much higher costs on their next lease.

Automakers have become less willing to subsidize leasing with the low monthly rates that once made it especially attractive. They also take a less profitable view of leases than financed purchases, even though leasing has traditionally helped support new-vehicle deliveries and customer loyalty, particularly among luxury buyers.

Recent supply disruptions also changed industry behavior. Automakers learned during the 2021 to 2023 inventory crunch, triggered by the chip shortage, that leaner dealer stock can reduce the need for discounts and lease incentives, while higher interest rates have further pushed up customer payments.

Longer loans and used-car constraints deepen market impact

Leasing still usually offers lower monthly payments than financing, with JD Power putting the average lease at about $650 a month versus about $800 for a financed new vehicle. Even so, analysts say the gap is far less compelling than it used to be, prompting more buyers to stretch repayment periods instead.

Edmunds data show that 23% of new-vehicle purchases in the second quarter include 84-month loans. Honda says it has seen an increase in seven-year purchase loans, while its lease rate remains above the industry average at 26% in the quarter, though still below pre-pandemic levels.

For dealers, the drop in leasing weakens a business model that relies on customers returning every three years. John Luciano, who owns a Volkswagen dealership in Amarillo, Texas, says leasing now makes up about 30% of his new-vehicle sales, down from 65% in 2022, and that an Atlas SUV costs about $130 more per month to lease than a couple of years ago.

The shift also affects the used-car market because off-lease vehicles normally feed dealer pre-owned inventories. Edmunds says the average selling price of a three-year-old used vehicle has risen 43% since before the pandemic as off-lease volume declines, extending tight supply conditions that have persisted since the pandemic.

Our earlier coverage of the OBX 2026-AHC3 Trust RMBS issuance outlined a prime, agency-eligible securitization backed by 589 qualified 30-year fixed-rate U.S. residential mortgages totaling about $336.3 million. We noted the deal’s multi-tranche structure and that the ratings work centered on loan-level analysis and cash-flow modeling—an example of how the cost and structure of long-term borrowing continues to influence market activity.

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