Skip to main content

The Globe and Mail

Why leasing collapsed across North America

If you lease, you are essentially renting a car. The rental payment is based on how much value that new ride will lose in the future.

pr2is/Getty Images/iStockphoto

Just a few years ago, nearly 50 per cent of Canadians leased their vehicle, but that has dropped to less than 10 per cent in the wake of the financial crisis in 2008, auto analyst Dennis DesRosiers notes.

"The issue wasn't the demand for leasing, it was the availability of leasing products," DesRosiers says in a note to client. "In order to offer a lease, the [original equipment manufacturers]have to be able to securitize their lease portfolios by bundling vehicles together and selling them as a derivative. With the collapse of the U.S. subprime mortgage market, the securitization of any asset-backed product virtually disappeared and thus leasing collapsed across North America."

DesRosiers notes, however, that the marketplace for securitized lease portfolios is returning to some measure of health, which means leasing is poised to make a comeback.

Story continues below advertisement

"Leasing accounted for close to 20 per cent of sales in 2011 and should account for mid- to high-20 per cent in 2012," he notes. "With very high used-vehicle prices, a lot of consumers could embrace a new vehicle especially if they are able to lease."

DesRosiers adds that a shortage of used vehicles is forecast to last a number of years, the result of which is "very little residual value risk in the lease market."

Report an error
About the Author
Senior writer, Globe Drive

In 25 years of covering the auto industry, Jeremy Cato has won more than two-dozen awards, including three times being named automotive journalist of the year. Jeremy was born in Montreal and grew up in the San Francisco Bay Area. More

Comments are closed

We have closed comments on this story for legal reasons. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.