Residual Losses on Auto Leases Fall

For the first time in several years residual losses on automobile leases have finally declined, although they are still high. The good news is provided in a study just released by the Association of Consumer Vehicle Lenders (ACVL) and reported by Randall R. McCathern in the latest edition of Auto Finance Update. Twenty-one of the 22 association members responded to the survey. The data reflect auto lessors' experience during 2000.

The exhibit below shows that more than 90 percent of returned vehicles resulted in residual losses, but that the average size of the loss has remained high, largely because auto manufacturers were providing high incentives to purchasers of new cars, including modest price increases. At the same time leases have become more expensive for consumers as lessors have factored into the price of leases the residual losses on termination.