More and more consumers are terminating their auto leases early, as job losses and pay cuts force them to stop making the monthly lease payments.
In 2009, more than 21 percent of lessees terminated their leases early, compared to the average 15 to 16 percent in 2004 to 2007, according to CNW Research.
Not only are more people terminating their leases early, but they are also terminating the leases with more months remaining than they did in the past. In 2000, consumers terminated their leases with about four months remaining in the contract. In 2009, lessees were terminating their leases with more than 14 months left in the lease.
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According to CNW’s data, the most common reason why people are terminating their leases early is a job status change, at nearly 24 percent. This includes either losing a job completely or a pay cut or loss of commission. The second most common reason to terminate a lease early was that the lease payment was too high.
CNW Research also found that current leases are between 48 and 50 months, which are much longer than the 24 to 36-month leases more common a few years ago. CNW says this is due to more independent lease companies writing the leases and fewer captive lenders leasing vehicles. Consumers took longer leases to keep their monthly payments low and get into a more expensive vehicle.
*CNW Research’s lease data includes both captive and non-captive financial institutions as well as independent lease companies.
Chart via CNW Research