As the past few years have shown, inflation has been an issue that has affected the finances and decisions of many.

Recently, inflation has become a major concern for businesses and consumers. For example, data provided by the Office for National Statistics on consumer prices measured by the Consumer Prices Index (CPI) were around 6.8% higher in July 2023 than a year before, that being down from 7.9% in June and 8.7% in May.

Inflation has not just affected one area; it’s also changed how people lease vehicles. In this blog, we will explain how inflation has impacted vehicle leasing and what you should be aware of to help aid your decision making.

‍

Understanding Inflation

In simple terms, inflation is when things get more expensive over time, meaning your money buys less and therefore, gives you less value for what you spend.

Understanding inflation is crucial because it affects a lot of things. For example, it can influence what you can afford to buy, how organisations set prices, where they invest their money, and even what choices government officials make.

Inflation is often caused by powerful factors like high demand for products (demand-pull) and rising costs to produce things(cost-push).

‍

The Vehicle Leasing Industry Overview

Before we get into the impact of inflation on vehicle leasing, it is important to understand how the vehicle leasing industry works, especially for organisations considering purchasing fleets, company cars, and other vehicles.

 Vehicle leasing provides an attractive option for organisations and individuals who want to drive vehicles without the responsibilities of ownership. Typically, this would involve making monthly payments, adhering to mileage limits, and following specific return guidelines.

‍

Inflation's Impact on the Vehicle Leasing Industry

Here are some examples of how inflation impacts and influences the vehicle leasing industry:

1. Higher Costs

Inflation makes prices go up, and that includes the cost of vehicles. This price increase has a ripple effect and can make monthly lease payments more expensive for consumers.

2. Residual Values

Residual values act as predictions about how much a vehicle will be worth when a lease ends. When inflation is high, these predictions can be less reliable, affecting the terms of leasing agreements.

3. Interest Rates

Inflation also impacts interest rates, which are especially important for lease contracts. When inflation goes up, interest rates follow suit, leading to higher lease payments for consumers.

4. Consumer Demand

As people's money does not stretch as far due to inflation, some turn to leasing because it can be a more affordable option than buying a car outright. At the same time, they might choose shorter lease terms to protect themselves from the uncertainty caused by inflation.

5. Manufacturer Incentives

Car manufacturers adjust their offers in response to inflation. They might change incentives and discounts to balance out the higher prices affecting how attractive leasing deals are.

6. Contract Changes

Inflation's ups and downs can lead to changes in lease contracts. These changes could mean alterations in lease terms, adjusting monthly payments and the options available when the lease ends.

‍

Strategies for Navigating Inflation

For Leasing Companies

Leasing companies look to actively handle the challenges they are brought through inflation by:  

1. Making smart changes to how they set prices.
2. Carefully reviewing the terms of their lease agreements.
3. Adding a variety of types of vehicles to their offerings to help offset the impact of inflation.

‍

For Consumers

Consumers can also adjust to these changing times by:

1. Considering getting a fixed-rate lease to protect themselves from sudden interest rate increases.
2. Taking the time to research the market to find the best possible vehicle leasing deals that suit their needs.

‍

How can Bluestone Help?

We understand the pressures inflation has had on the vehicle leasing industry, affecting costs, terms and the choices consumers and organisations have.

As we navigate these uncertain times, being informed on the best options available can be your best resource. By understanding how inflation and vehicle leasing are connected, you can confidently make better choices in today's changing economic world.

Bluestone Vehicles can arrange competitive finance for personal and commercial vehicle use as well as fleet management solutions for you or your organisation.

The team will work closely with you to understand your requirements and move quickly to lock in value through access to thousands of dealerships across the UK so you can get the best deal in the current climate.

If you’d like to discuss how our team of experts can help you, contact us today.

‍

_{Last Updated: September 2023. Version: BS.202311.01BL28}