The first half of 2025 brings a huge shift in the automotive market, particularly in the world of leasing.
Auto lease returns are expected to drop by more than 40% compared to the previous year. This could remove nearly one million vehicles from the industry’s pipeline. It also presents a challenge for car dealerships that depend on a steady return of leased vehicles to maintain inventory, but it also presents a unique opportunity. With the right strategies and renewed focus on competitive lease specials, dealers and lenders can stay ahead of the curve.
What’s Behind the Decline in Lease Returns?
To understand the leasing slowdown in 2025, you have to look back to 2022. That year, inventory shortages drove up prices and slashed incentives. While financing rates remained relatively stable, lease payments jumped by about 10% as a percentage of MSRP compared to pre-pandemic figures. Faced with rising lease costs and fewer incentives, many consumers who would have leased opted to finance instead.
It wasn’t just the payment difference, either. Longer financing terms became more appealing. In H1 2022, nearly half of all former lessees who chose to finance a new vehicle committed to 72-month or 84-month loans. This shift is now echoing into 2025, as those vehicles aren’t returning to the market on a typical 36-month lease cycle.
The Case for Lease Specials in 2025
With lease returns declining sharply, car dealerships have a compelling reason to reintroduce strong lease specials. These incentives attract new customers and can also coax previous lessees back into leasing. Lower lease payments, loyalty bonuses, and flexible mileage limits are all tools dealers can use to reignite interest.
Consumers still see value in leasing, particularly those who want the latest technology, lower monthly payments, and a vehicle under warranty. Making leases competitive again through well-timed lease specials could draw these buyers back into the cycle.
Targeted Strategies for Dealership Success
Not all markets will be affected equally. More than half of projected lease maturities are concentrated in five states, including California and Michigan, so regional strategies are key. Dealers in those areas should double down on local marketing, using data to identify high-value lessees and tailor offers to them specifically.
Education is also crucial. Many consumers may not realize their lease has equity or that better deals are now available than when they last shopped. Providing transparency about payment options and benefits can ease decision-making and reduce friction.
Preparing for a Gradual Recovery
While 2025 may be tough, there’s potential for improvement as early as 2026. An increase in 36-month lease volume during 2024 means more vehicles will return starting in 2027. That volume could rise even further if more consumers are swayed by compelling lease specials today.
In the meantime, dealers and lenders must adapt, whether through creative promotions, targeted lease return outreach, or offering more flexible lease structures that reflect consumers’ evolving preferences.
Making the Most of a Slower Lease Cycle
The leasing slowdown in 2025 doesn’t have to mean a slowdown in business. Car dealerships that act now by reintroducing attractive lease specials, educating their customers, and tailoring strategies by region can not only soften the blow of reduced lease returns but set the stage for renewed growth when the market rebounds.
When the right deals meet the right drivers, leasing remains a win…for everyone.
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