It’s the first month of a new year, which means it’s a great time to look back on what happened in the industry last year and look forward to what we expect to happen in this current year.
Leasing Sector is Stabilising
In the last three months we’ve seen a levelling of enquiries, orders and deliveries. In my opinion the market is still very subdued but we are now seeing some stability. I think this is in part to less bad news generally over the economy, which we saw significantly reducing consumer confidence in the beginning of the year.
With a general levelling out of interest rate rises I think the period of rising basic list price (the cost of the car) and rising costs of funds (the cost of the interest element of a lease) is now behind us. I think that the stability of pricing has given customers the confidence that maybe the worst is over, not just in our sector but the wider economy as well. With inflation reduced and interest rates no longer rising more customers have the confidence to consider a long-term purchase such as a new car lease.
New Car Stock is Coming Back
Supply of new cars has improved and stock vehicles are now more readily available. It has been a continuous improvement during 2023 but in the last three months it’s been more noticeable, with more pockets of in stock vehicles coming up.
Even factory order lead times have reduced and many manufacturers now have a 12 to 16 weeks factory order to delivery time frame. This is putting us back to the pre-pandemic levels and I think the shorter wait times will have customers looking at a wider range of models instead of the few with quicker lead times as we’ve seen in the past couple of years.
Stock being more readily available is a good thing for us and our customers. I think it will lead to manufacturers increasing the discount available on these models to generate more sales, which means better lease prices. We have already seen some signs of this with heavy discounts on electric models from a couple of manufacturers at the end of 2023. There were discounts of 45% and more being offered on two specific models for the manufacturer to achieve their registration targets, and I expect to see more of this, though maybe not quite as high, in the coming year.
I do expect stock levels to continue to build, as demand is still weaker than it was and we’re seeing more vehicles being produced and either in or on their way to the UK.
Delay to ICE Ban is Impacting Drivers’ Choice
With the news in September that the ban on new cars with petrol, diesel and hybrid engines was being pushed back to the original 2035 date we are now beginning to see some customers reconsider getting an electric vehicle (EV).
We’ve seen a handful of customers cancel electric orders and push the decision out for one more lease cycle, which is typically two to three years, as they’ve now got longer to decide on the right model, make the changes needed for home charging and just general have a bit more time with a more familiar drive train.
I think as the price of EVs and the mileage range they’re able to achieve continues to improve then both individual and business customers will look to make the switch in the next few years, provided they aren’t financially worse off when compared to running and internal combustion engine (ICE) vehicle. We are also seeing more competition in the electric sector with new brands entering the market, such as BYD as well as existing brands continuing with their electrification programmes. A more competitive market will lead to better pricing, and I expect we’ll see the cost of EVs become more affordable.
There is some concern about the cost of insurance on electric cars being prohibitive to adoption but I also expect that to fall as EVs become more commonplace.
The Leasing Sector in 2023
I think that in the past few years manufacturers have become used to making a higher profit per unit sale but this year we’ve seen consumer demand drop that they’ve begun to need to discount their vehicles again to stay competitive. The dip in consumer demand has been due to two factors, the increase in available stock and reduced consumer confidence in buying a long-term financial product.
Consumer demand has stayed relatively flat throughout 2023 with consumers in the main looking to get value for money, which has been harder to find this year. Consumers are still going to want great value for money in 2024 but with the discounts increasing the number of models available to the individual will improve and I expect we’ll see a gradual increase in the number of enquiries and orders.
Lease funders have had to be far more agile with their pricing. There are more funders operating on the market which means they can no longer pitch their pricing at the start of a quarter and not revisit it until the quarter changes. Instead, we’re seeing funders reviewing their prices regularly, and this has made the work of our pricing team even more essential as we want to keep the prices our customers see as accurate as possible.
We’ve also seen funders more willing to trim their standard pricing in order to win business and maintain their share of the market as well. This has been beneficial for us, and our customers, as there have been a few occasions where we’ve been able to save our customers money by getting a trim on their lease.
Xcite Car Leasing in 2023
2023 has been a big year for us here, we’ve rebranded to the Xciting new name and website and continued to invest in our staff, websites and internal systems and processes. This has allowed us to support our customers far better than ever before, delivering a slick and joined up online service backed by experienced and knowledgeable teams of sales and support staff.
We’ve positioned ourselves to take advantages as the market improves and are working with all of the UKs leading finance houses as well as a number of dealerships from all brands currently on sale in the UK to ensure we are able to access the best prices on the market.
What’s Coming Up in the Leasing Sector in 2024
Baring any major global shocks, I think that 2024 is going to be a year of economic stability. I believe we’ll see inflation slowly reducing from the current four per cent, which combined with falling interest rates will lead to an uptick in consumer confidence as people feel the worst of the cost of living crisis is over and life is beginning to return to normal.
Discounts returning to the sector will mean lower lease rentals and combined with the improving consumer confidence should translate to more orders being placed and I’d expect to see our number increase year on year.
I don’t expect any major changes this quarter but think we’ll see trading conditions improving from the end of quarter two, so summer time onwards.
Spencer’s Top Tip for Leasing in 2024
Get in contact and get on our radar. Let us know what you want and as soon as we seen an offer that might work for you we’ll be in touch. Our team are on hand to help any customer looking for a new lease and the sooner you reach out the sooner they can start looking and find a deal that meets your needs and timeframe.
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