US car leasing declines as higher costs hit buyers

Car leasing in the United States has dropped significantly in recent years as automakers reduce incentives and

Car leasing in the United States has dropped significantly in recent years as automakers reduce incentives and consumers struggle with rising monthly payments.

Before the COVID-19 pandemic, leasing accounted for nearly 30% of new vehicle deals in the US. However, the share fell sharply during the post-pandemic vehicle shortage and has not fully recovered. In the first half of 2026, leasing represented around 23% of new car transactions.

Industry experts say one of the biggest reasons behind the decline is the end of attractive lease offers that previously encouraged customers to choose leasing over buying.

Automakers have become less willing to provide low-cost lease deals as they focus on maintaining tighter vehicle inventories and reducing discounts. As a result, many customers returning after the end of their lease terms are facing significantly higher monthly payments.

Dealers say some customers are surprised to find their next lease costing hundreds of dollars more than their previous agreement, causing many to reconsider leasing altogether.

The decline in leasing has added pressure to vehicle affordability in the US market. Some buyers are now choosing longer financing plans, including loans lasting up to seven years, to manage higher vehicle prices.

Leasing usually allows customers to drive newer vehicles with lower monthly payments compared with traditional financing. The average lease payment remains lower than loan payments, but industry analysts say the gap has narrowed significantly.

Experts believe automakers changed their approach after the 2021–2023 vehicle shortage caused by semiconductor supply disruptions. Limited inventories helped companies reduce incentives and maintain stronger pricing power.

The decline in leasing is also affecting the used-car market. Vehicles returned after three-year leases have traditionally provided dealerships with a steady supply of affordable pre-owned cars.

With fewer leased vehicles coming back to the market, used-car supplies have tightened and prices have increased. Data from industry analysts shows that average prices for three-year-old used vehicles have risen substantially compared with pre-pandemic levels.

Dealers warn that fewer lease customers could also weaken long-term customer loyalty, as leasing often brings buyers back to showrooms every few years for new vehicles