Car leasing has dropped from its historic role as one of the quickest paths onto a new car lot, and the data indicate how far the shift has gone. Before the pandemic, nearly 30% of new-vehicle deals in the United States were leases, according to JD Power. That proportion decreased to 17% during the post-pandemic inventory deficit and has only partially recovered subsequently. In the first half of 2026, leases made roughly 23% of new car transactions.
The fundamental factor for the reduction is straightforward: automakers ceased paying the rock-bottom monthly payments that once made leasing an easy sell. Customers who return at the conclusion of a lease term now frequently discover quotations on their next lease ranging a few hundred dollars higher per month than what they were paying before. “The customer still has a desire to lease,” said David Ferraez, a General Motors dealer in New Jersey. “The big challenge is getting the customer to accept the much higher payment.”
The retreat has reverberated beyond the showroom floor. Fewer affordable leases means fewer returning customers strolling back into dealerships when their agreements expire, and it has pushed some purchasers toward stretching their vehicle loans out to seven years simply to keep monthly payments manageable.
why automakers stopped supporting leases
A lease works by having the buyer make monthly payments, often over three years, with an option to purchase the car at a specified resell price once the contract finishes. If the buyer passes on that option, the vehicle goes back to the lender, usually the automaker’s own finance arm.
Leasing has always given purchasers a lower monthly payment than financing an item altogether. “It’s a worse deal for the automakers because the automakers make less money on a lease per vehicle, but it kept new-car deliveries coming and brought customers back to the lot every three years.” Leasing was particularly prevalent among luxury manufacturers, whose purchasers tended to seek the latest style and technology rather than long-term ownership.
That was the case with the computer-chip bottleneck that curtailed car supply from 2021 to 2023. Automakers recognized that a leaner dealer lot meant fewer discounts, rebates and inexpensive lease terms to sell inventory. Many stuck with that leaner approach even after the chip scarcity eased, and increasing interest rates on top of that have made leasing more expensive across the board.
The divide between leasing and financing hasn’t gone away. JD Power estimates that the average lease cost is roughly $650 per month compared with $800 to finance a new vehicle. Ivan Drury, head of insights at Edmunds, said the math has changed for consumers. “They’re still a long way behind the old days,” he remarked.
The repercussions is shown in the figures from Edmunds : 23% of new-vehicle purchases in the second quarter of 2026 were financed with 84-month loans, seven years of payments once rare in the auto industry.
And Honda has witnessed its own consumers head off in that way. The automaker’s 84-month purchase loans have increased but its 26% lease rate in the second quarter remains above the industry average and below its pre-pandemic rate. “Leasing was a lower price point. That may not be the case anymore,” said Lance Woelfer, Honda’s vice president of automotive sales.
dealers watch a once dependable customer pipeline dry up
The drop has had a direct impact on dealers, who have benefited from the predictable cycle of returning purchasers with three-year lease periods. Dealers say many of those same consumers now resist when they realize what a new lease will really cost.
John Luciano, owner of a Volkswagen dealership in Amarillo, Texas, said leasing had dropped from approximately 65% of his new-vehicle sales in 2022 to roughly 30% now. For example, he said, an Atlas SUV costs $130 more a month to lease than it did a couple of years ago. “It creates a lot of defection,” Luciano remarked.
The brand is still committed to leasing and we recognize the value that leasing has in customer loyalty and future vehicle sales, a Volkswagen representative said in a statement.
Dealers say a similar pattern is occurring across brands. Customers used to be comfortable with a set lease payment and now they see offers $100 to $200 higher per month and walk away instead of signing, interrupting a cycle that used to draw them back automatically every three years.
used-car prices are getting squeezed by the leasing downturn, too
The decrease in leasing has implications that go far beyond new-car lots. Leased cars usually wind up on a dealer’s used car lot, making leasing one of the main sources of supply for the used vehicle market. There are less leases that started three years ago, so less of those vehicles are coming back now and the shortfall has been felt in the used-car market.”
The average selling price of a used vehicle that’s three years old has jumped 43% since before the epidemic, according to Edmunds statistics, a surge the firm attributes directly to fewer off-lease vehicles entering the market. ““There is a reason why used vehicles are so expensive, and it’s because there are so few leases,” Drury said.
The result is a used-car market still working through a supply crisis that began with computer chips years ago and has been compounded by automakers’ unwillingness to return to their old lease playbook. Buyers who had previously used leasing as an inexpensive means to get a new vehicle, and used-car shoppers who depended on those leased vehicles cycling back onto lots, are now being hit with increasing pricing without a clear schedule for relief.
