Driving has remained one of the few favored ways for getting around a city as the coronavirus pandemic continues to impact urban life. Still, car ownership trends have been impacted by the outbreak, with many preferring to rent or lease a vehicle instead of buying. People are looking to spend less and get more flexible deals as economic uncertainty maintains. We look at how exactly things changed in the article below.
It’s clear that economic instability in the U.S. is still making headlines and this is reflected in several areas of retail and the services sector. Uncertainty has led to an increased need for flexibility. One industry where the value of flexibility has definitely gone up is short-term car leasing. Job losses are keeping many off the roads and have determined many more to sell their cars or find a solution to get rid of the financial obligation of a lease. This is why the lease swapping market is now booming—whether it’s finding someone to take over the lease payment completely or just swapping for a cheaper model.
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The latest report from Swapalease.com, the largest automotive lease marketplace, published in August, shows that lease approval ratings declined slightly in July, even though the number of applications increased. The approval rate in July was at 65.1 percent, slightly lower from 67.1 percent in June. The report quotes the company’s executive vice president, Scott Hall, who says that people are now looking for alternative ways to own a car and want “short-term commitments with low risk.”
Payment deferral is another trend we are seeing in the short-term car leasing business today. For example, Hyundai created a special page on the company’s website dedicated to the impact of COVID-19 and its support policies to help customers who lose their jobs. Probably the most important is covering up to six months of payments for Hyundai owners who purchased or leased a Hyundai vehicle between March 14 and May 17 if they lose their job due to COVID-19 through December 31. Other car leasing companies allow amending the customer’s monthly mileage or even ending the contract early—in exchange of a termination fee—if it’s more than halfway through.
Subscription models have seen mixed results for auto makers. For example, Mercedes Collection, the subscription program launched by the German company in 2018 was terminated this summer. At the same time, Porsche announced it’s expanding its subscription programs with a monthly single-vehicle subscription initiative that will be launched in Los Angeles, Atlanta, Phoenix and San Diego on September 25.
Porsche’s pilot subscription program, which launched three years ago in Atlanta revealed that, in average, customers prefer using the same car for a few months, not longer. Offering this type of flexibility during a pandemic makes even more sense. Company representatives claim that the subscription model attracts a younger demographic compared to the usual Porsche customer and that 80 percent are actually new to the brand, according to a recent press release. Audi, BMW and Volvo also provide subscription programs in some U.S. cities. General Motors suspended its subscription initiative two years ago, with plans to resume that have not happened yet.
Car rental companies like Hertz, Avis or Budget have also put together offers during this pandemic period. Budget offers short-term rentals with contracts ranging from one to 11 months. The longer you rent, the more you save. The same principle is applied by Avis, which made headlines with the layoffs announced in spring as the outbreak’s effect started to hit. Since both Avis and Budget are owned by the same entity, their flexibility terms are the same—customers can make changes to or cancel their reservations without any incurring fees.
Hertz, which was also severely impacted by the pandemic, offers a multi-month car rental program with no upfront fees or finance charges, no long-term lease commitments and a flexible vehicle exchange option. In a special section on its website dedicated to coronavirus advisory, the company recognizes the importance of flexibility, reminding customers that they can pay for the car at pick-up and that it does not charge any cancellation fees either.
With new car sales decreasing in popularity and rentals becoming a more appropriate option given the times we live in, rideshare providers want a piece of the pie. Lyft launched its partnership with SIXT—arranged in pre-pandemic times—to offer car rentals through the rideshare app, starting this month, in Seattle, Las Vegas and Miami with expansion to the other cities in the company’s network expected in coming months. It is not yet clear what are the exact rental terms and offers that Lyft is offering, but we’ll definitely be watching the story as it progresses.