More and more car buyers in the US seems to be ahead rent their next vehicle support buy or sponsor they completely, according to a new report from Business Insider.
TransUnion said leases accounted for just 17% of the auto market in July 2022. That’s a big drop from 31% of share leases in January 2022, according to TransUnion. Apparently, of the 3.8 million people whose car rental expired from July 2021 to June 2022, only about a quarter of them decided to rent a car again. That number is down 40% from January 2020. During that same July-June period, 26% of tenants decided to terminate their lease. rental contract at least six months prior to the expected lease end date. That’s a 63% increase since 2019.
Business InsiderOur report points to a number of reasons why people aren’t renting cars in the same numbers as they used to. One of them, as you might expect, is money. Renting a new car is getting more and more expensive. Cox Automotive says the average monthly rental payment reached $661 in December 2022. That’s a 33% increase from March 2020.
Industry constraints were also partly to blame for the drop. Inventory issues and dealer trouble mean shoppers don’t want to have to deal with a return to the car market every two to three years. It’s just not worth the trouble for many drivers. BI says that, in general, people tend to keep their cars longer. The outlet says that S&P Global Mobility has found the average age of a vehicle on US roads to be 12.2 years old in 2022.
The article acknowledges that some of that has to do with the impact of chip shortages on the number of new and used cars that can be purchased at dealerships since the start of the pandemic.
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A final contributor to this new lease-less trend is the fact people are more willing to put money into maintenance on their vehicles that have rapidly increased in value (for the most part) over the past couple of years.
“The vehicle park is now hundreds of billions of dollars more valuable,” Charlie Chesbrough, Cox senior economist, told Business Insider. “Do I replace that engine? Would I fix that transmission and spend thousands of dollars on this car? The economy has really shifted to suggest that, yes, it makes more sense to invest in that vehicle.”
All of these factors have come together to make the used car market a nasty one. Basically, there are fewer rental vehicles (read: newer and low mileage, but still used) geared towards the used market. However, this does not reduce the market demand for this type of vehicle.
It only takes a simple calculation to realize that there are fewer options for the dealer lot, but the same amount of demand will keep inventory low and prices high. It is an unfortunate reality of people like me who cannot afford to buy a new car.
The high price of used cars has recently started to come down, even if it’s only slightly. Business Insider says information from Cox shows the average cost of a used car in the US in December 2022 is $27,143.
