NEW YORK (TheStreet) – Auto leasing is a more popular option for car buyers than ever, but post-recession credit restrictions have locked out lots of potential drivers.
According to auto pricing and analysis site Edmunds.com, 28% of all new-car transactions in April were leases. That's up from a low of 12% during the recession in August 2009 and well above the pre-recession high of 19.5% in 2007. But as lease transfer site Swapalease.com notes, credit approvals for leases in the secondary market sat at 69.6% in May. Approvals sit at 65.9% for all of 2015, which isn't great when Swapalease considers three-quarters of approvals “healthy” and notes that April's 78.6% rate came only with the help of lease approvals for luxury brands including BMW, Mercedes-Benz and Lexus.
According to Scot Hall, executive vice president of Swapalease, many of those being denied for leases are subprime customers. Hall says Swapalease is seeing more customers with credit scores in the 600s going through the lease application process. Experian Automotive says leasing credit has loosened, with the average new-vehicle lessee's credit score of 718 in early 2015, down from 721 the same time last year. In Hall's view, that isn't good enough.
“We’re hopeful that the industry will consider new ways to extend lease options to customers even with less-than-stellar credit,” Hall says. “The industry has expanded risk environments to very long-term loans, and we feel the environment for risk would be muted in an environment of less than 24 months even for a subprime credit profile.