The automotive financing landscape has undergone significant changes since the Covid-19 pandemic particularly in the realm of car leasing. What was once a popular and affordable option for drivers seeking to upgrade their vehicles every few years has become less accessible. This shift is primarily due to automakers reducing their lease subsidies, a trend that began during the pandemic-era vehicle shortage.
Leasing accounted for just 18.4% of new-vehicle transactions in the second quarter of 2026, a notable decrease from the approximately 30% seen before the pandemic. This decline can be attributed to several factors, including changes in automaker strategies and evolving consumer preferences.
The decline of lease incentives
Before the pandemic, automakers frequently offered subsidies to make leasing more attractive. These incentives lowered monthly payments and reduced upfront costs, helping to move new vehicles off dealer lots. However, the vehicle shortage during the pandemic altered this dynamic. With fewer cars available, dealers had little incentive to offer leases when they could sell vehicles outright for higher prices.
The car shortage has since eased, but many lease programs have not returned. Automakers have learned to manage inventory more efficiently, reducing their reliance on discounting and incentives. Nick Mintzias CEO of automotive platform DriversHub notes that keeping inventory lean has become a strategic priority for automakers.
The selective nature of remaining lease deals
The lease deals that do remain are often more selective and model-specific. Patrick Peterson head of content at automotive data provider GoodCar observes that the most favorable lease programs are typically tied to vehicles with high inventory, unpopular configurations, or outgoing model years. This selectivity contrasts sharply with the pre-pandemic era, when attractive lease programs were more widely available across various vehicle types.
Electric vehicles (EVs) are an exception to this trend. Lease incentives for EVs remain relatively common, although EV leasing has fallen sharply. In the first seven months of 2026, about 47% of new EVs were leased, down from 75% over the same period in 2026. This decline followed the expiration of a federal tax credit that leasing companies could claim on qualifying EVs. Despite this, Mintzias emphasizes that EV lease incentives are still far better than those for gas vehicles in the 2026 market.
The implications of fewer leasing options
For drivers who prefer to upgrade their vehicles every few years, leasing can still offer lower monthly payments on popular models. In the second quarter of 2026, average lease payments were lower than finance payments for models like the Honda CR-VToyota Camry and Ford Explorer. Lessees also typically put less money down compared to those who finance their vehicles.
However, the reduced availability of attractive lease offers can push some buyers toward financing instead. This shift makes it more important for drivers to consider how long they plan to keep their car before taking out a loan. Mark Stancato CFP and founder of VIP Wealth Advisors advises matching the financing term to the expected duration of car ownership. A 72- or 84-month loan can be a poor fit if a buyer decides to upgrade after only a few years, potentially leaving them owing more than the vehicle is worth.
Carrying remaining debt into the next loan can create an expensive cycle that’s difficult to break. This underscores the importance of carefully evaluating financing options in the current automotive market.
