DETROIT, July 30 - Leasing of new vehicles in the United States has dropped in recent years, cutting into what was once a popular path to driving new cars for many consumers. Research firm JD Power estimates that leasing made up about 30% of the U.S. new-vehicle market before the pandemic. That share fell to 17% during the post-pandemic period of constrained vehicle availability, and leasing remained below its earlier level in the first half of 2026 when leases accounted for 23% of new-car deals.
Automakers tighten lease incentives
A central factor in the decline is that manufacturers have become less willing to underwrite low monthly lease payments that historically drew customers to leasing. Dealers say consumers returning at the end of a three-year term are commonly offered lease payments on a replacement vehicle that are several hundred dollars higher than what they previously paid. "The customer still has a desire to lease," said David Ferraez, a New Jersey General Motors dealer. "The big challenge is getting the customer to accept the much higher payment."
Leasing traditionally provides lower monthly payments than financing a purchase, and for automakers it tends to be less profitable. Still, leases have served to bolster new-vehicle deliveries and to cycle buyers back to dealerships on a predictable schedule. The product remains particularly appealing to luxury buyers who value frequent access to new features and updated designs.
How industry shifts altered the market
Automakers adopted a different approach after experiencing a vehicle-availability squeeze from 2021 through 2023 tied to a shortage of computer chips. With dealer inventories kept leaner, manufacturers found less pressure to use discounts and other incentives, including attractive leasing terms, to move cars. Alongside that strategic shift, higher interest rates in recent years have also pushed lease customers into paying more.
Even with those increases, leases on average continue to offer lower monthly payments compared with financing: JD Power reports lease payments average about $650 a month versus roughly $800 a month to finance a new vehicle. Still, leasing offers "are nowhere near as good as they used to be," said Ivan Drury, director of insights at car-shopping site Edmunds.
Consequences for buyers and dealers
The change in leasing economics has helped drive some buyers toward lengthening their loan terms, sometimes to seven years. Edmunds data show that 23% of new-vehicle purchases in the second quarter included 84-month loans, and Honda has recorded an increase in these 84-month purchase loans. Honda's overall lease rate remained higher than the industry average at 26% in the second quarter, but it still falls short of pre-pandemic figures. "Leasing used to be a lower price point. That may not always be the case anymore," said Lance Woelfer, Honda's vice president of automobile sales.
Dealers say the move away from inexpensive leases has both reduced customer retention and heightened sensitivity among consumers to higher monthly bills. "Customers cringe" when confronted with lease offers that are $100 to $200 more per month than their previous payments, according to dealers familiar with the trend.
At John Luciano's Volkswagen dealership in Amarillo, Texas, leasing now represents roughly 30% of new-vehicle business, down from about 65% in 2022. Luciano said customers are resisting the larger payments; he noted an Atlas SUV costs about $130 more per month to lease than it did a couple of years ago. "It creates a lot of defection," said Luciano. A Volkswagen spokesperson said, "The brand remains fully committed to leasing and understands the importance it has on loyalty and future sales of our products."
Impact on the used-car market
The retreat in leasing has also diminished an important supply source for the used-car market. Vehicles that come off lease typically flow into dealer pre-owned inventories. Because fewer cars are returning from leases, used-car inventories have been tight since the pandemic, contributing to higher prices.
Edmunds data show the average selling price of a three-year-old used vehicle has risen by 43% since before the pandemic, a change that Edmunds' Drury attributes in part to the decline in off-lease volume. "If we look at how expensive used vehicles are, it is in part because there are so few leases," he said.
Summary
Leasing of new vehicles in the U.S. has fallen from roughly 30% before the pandemic to 23% in the first half of 2026, after dipping to 17% during post-pandemic shortages. Automakers' reduced use of low-rate leases, tighter dealer inventories following a chip-related shortage, and higher interest rates have all contributed to higher monthly lease payments. The shift has encouraged some buyers to take longer finance terms and has constrained the flow of off-lease vehicles into the used-car market, pushing up prices for three-year-old vehicles.
Key points
- Leasing's share of the U.S. new-vehicle market: about 30% pre-pandemic, 17% during post-pandemic shortages, 23% in H1 2026 - source: JD Power.
- Average monthly payments: leases about $650 vs financing about $800 - source: JD Power; leasing remains cheaper but less favorable than before, per Edmunds' Ivan Drury.
- Longer-term loans are rising: 23% of new-vehicle purchases in Q2 included 84-month loans - source: Edmunds. Honda noted an increase in such loans and a Q2 lease rate of 26%.
Risks and uncertainties
- Higher monthly lease payments may push more buyers toward extended financing, affecting the auto lending market and increasing household debt loads - impacted sectors: auto finance, consumer credit.
- A reduced stream of off-lease vehicles tightens used-car supply and supports elevated used-vehicle prices, which can influence residual values and dealer used-car inventories - impacted sectors: used-car retail, dealership margins.
- Dealership customer retention could suffer if returning lessees decline to accept higher payments, potentially affecting new-vehicle sales volumes - impacted sectors: new-vehicle retail, dealership operations.