Personal Car Leasing Market in Japan: Key Research Findings 2018

Yano Research Institute (the President, Takashi Mizukoshi) has conducted a survey on the domestic personal car leasing market and has clarified the market status, trends of market players, and the future outlook.

Flow Chart of Personal Car Leasing Market
Flow Chart of Personal Car Leasing Market

Market Overview

According to Japan Automotive Leasing Association, the number of lease vehicles for personal car leasing reached 257 thousand as of March 2018, accelerating the growth speed to exceed 120% of what in the same period of last year.  The number of entire domestic lease vehicles, including those for corporate customers, was 3,600 thousand, out of which the rate of those vehicles for individuals has come to occupy about 7%.  Because of decreasing working population, the number of vehicles possessed by companies is on the fall, whereas the rate of using lease vehicles as company cars seems to be rising, proven by the recent annual growth rate of the number of lease vehicles for enterprises keeping 3% (*calculated by Yano Research Institute based on the data by Japan Automotive Leasing Association).

On the other hand, the number of vehicles possessed by individuals is still increasing, according to the data by Automobile Inspection & Registration Information Association, indicating extensive potential demand in personal car leasing.

The growth of personal car leasing is driven by retail businesses in the automobile aftermarket that has come to sell lease vehicles to individuals through alliance with vehicle leasing specialty companies.  Such retail businesses apply to repair factories, gas stations, used-car dealers, and etc., everywhere in cities.  Since the demand of maintenance services and the volume of gasoline are on the decline, many of such businesses need to imminently revive the sales of their main business.  Now that they have begun using the new business model of vehicle leasing (i.e., actually selling the vehicle in the long term), they have come to be able to take part in new car sales, which is supposed to be a closed market, and able to secure customers of new car sales.  Also, since such personal car leasing usually includes maintenance services during the leasing period, they can secure the maintenance demand during that period.  Establishment of new business model of vehicle leasing, i.e., selling vehicles in the long run, has come to be a new method for non-car dealers to participate in the competition of acquiring customers of new car sales.  Increase of new market entry by such aftermarket non-dealers is likely to invigorate the new car sales market further more.

Noteworthy Topics

Relating to this research on vehicle leasing, a consumer survey about automobile purchasing was conducted during the period between April and May 2018, to 30,000 consumers including buyers of new or used cars. Among those new car buyers since 2013, 66% of the new car purchasers in 2018 payed in cash lump sum.  While it indicates that the majority of car purchasers pay in cash, some consumers do choose other payment methods such as residual value payment* or personal car leasing which allow them to pay only for the automobile body corresponding to the number of years the buyer plans to use without changing the future value of the vehicle.  In the case of personal car leasing, the vehicle belongs to the vehicle leasing company, and in the case of residual value payment the vehicle belongs to, in general, the credit company that had set the car loan plan until the net price of vehicle together with the interest rate during the loan term is completely paid.

As a result of the survey, a certain number of consumers do not care about driving a car that does not belong to them.  It means that there is a base for personal car leasing to grow further.

*Residual value payment allows the car borrower to pay by lump sum at the end of a loan term during which regular monthly repayments have been made.

Research Outline

1.Research Period: October 2017 to June 2018
2.Research Object: Vehicle leasing specialty companies that sell leased automobiles to individuals, car dealers owned by oil refiner-distributors, non-dealer car sellers, and used car purchase companies
3.Research Methogology: Face-to-face research by the expert researchers, surveys via telephone/email, consumer survey, and literature researchVehicle leasing specialty companies that sell leased automobiles to individuals, car dealers owned by oil refiner-distributors, non-dealer car sellers, and used car purchase companies

What is Personal Car Leasing Market?

Personal car leasing is developed from the vehicle leasing business mainly provided for corporate customers, which later applied to individuals (including sole proprietors).  By determining the number of years to use the vehicle beforehand at the time of making a lease contract, the vehicle leasing fee is set at the net price of the vehicle from which the vehicle market price at the expiring date of the contract in the future is subtracted and added with the interest rate during the contract period.  Since the vehicle market price at the expiring date in the future assumes that the vehicle is sold at an auto auction, it costs only the price of automobile itself and legal expenses therefore no salvage value of the vehicle included, a vehicle borrower is more profitable than a buyer who uses lump-sum payment of cash or an automobile loan.  This is what vehicle leasing companies appeal to customers.  Also, the longer the contract period is, the lower the monthly payment will be, so that the contracts tend to be longer period of time.
The channels of personal car leasing are not only available via online by vehicle leasing specialty companies and automaker-owned dealers, but also through vehicle stores owned by non-dealers (used-car sellers), gas stations, car maintenance service providers, and used-car purchasing companies that have a business alliance with vehicle leasing specialty companies.

Published Report

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