SOUTHFIELD, Mich. – Toyota is using $199-a- month leases on its Camry to keep it the top-selling car in the United States, much as it did to recover from record recalls and Japan’s tsunami. Now it’s pulling the rest of the industry with it.
Once primarily a tool for selling luxury vehicles, leasing is becoming common among hot-selling family sedans, such as Ford’s Fusion and Honda’s Accord. Supported by high used-car prices, low interest rates and Americans’ tendency to buy vehicles based on the monthly payments, U.S. auto leasing is at the highest levels in at least a decade and pacing the industry’s best year since 2007.
It’s a great way to present a product at very affordable monthly prices, Peter DeLongchamps, a vice president for Group 1 Automotive Inc., the fourth-largest U.S. auto dealership group and one of the nation’s biggest Toyota retailers, said by telephone. There’s absolutely no question Toyota is using leasing to contend in an increasingly competitive mid-size car segment.
Leasing’s share of U.S. new-vehicle sales has been at least 22.5 percent in every month this year, according to J.D. Power & Associates. The four top months for lease penetration in the last decade, the extent of Power’s data, were in 2013, and each of the year’s first six months rank among the top nine, the Westlake Village, Calif., researcher said.
The momentum for leasing is driving U.S. car and light truck sales to a six-year high. Deliveries may climb 15 percent for July to 1.33 million, the average estimate of nine analysts in a survey by Bloomberg News. The annualized industry sales rate, adjusted for seasonal trends, may climb to 15.8 million, the average of 15 estimates, from 14.1 million a year earlier.
The industry sales pace for the month keeps the U.S. on track for its best year since 16.1 million vehicles were sold in 2007.
It’s also further evidence of the disparate paths of the American auto industry and the city of Detroit, which filed the nation’s largest municipal bankruptcy in history this month.
The reasons for leasing’s strength extend beyond the race for the top-selling U.S. car.
Industrywide gains in product quality and strong used-car prices allow automakers to project higher values for their vehicles when leases expire. This trend is combining with record-low interest rates in allowing the companies to offer cheaper monthly payments.
The ability to offer Camry at cheaper monthly rates is crucial as Toyota tries to stem declining demand for the car in the year’s first half. Camry deliveries slipped 2.9 percent to 207,626, according to researcher Autodata Corp.
Competitors, including Ford, Honda and Nissan, are closing in on Camry, the top-selling car in the U.S. for the past 11 years. A 20 percent surge in Tokyo-based Honda’s Accord deliveries during the first half cut its sales deficit to Camry by 65 percent from a year earlier, to less than 21,000.