What's Stopping Leasing Companies from Profiting Off Used-Car Leasing?

The demand for used-car leasing is growing but traditional leasing companies are watching from the sidelines. Why? It’s not the market holding them back. It’s themselves.

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The used-car leasing market presents a compelling opportunity. Consumer demand continues to rise as buyers seek affordable access to quality vehicles without the commitment of ownership. Yet many established leasing firms struggle to capitalise on this growing segment, watching as digital-native competitors gain ground.

The challenge isn't market demand; it's internal barriers that prevent traditional leasing companies from adapting quickly enough. From outdated technology infrastructure to rigid risk models, these obstacles create friction that hampers growth and profitability.

This analysis explores the key internal hurdles holding leasing companies back from maximising used-car leasing opportunities. More importantly, it presents actionable strategies that can unlock this growth channel, drawing insights from successful transformations across related industries.

For mobility leaders seeking to modernise their operations, understanding these barriers is the first step toward building a more agile, profitable leasing business that can thrive in today's dynamic automotive landscape.

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TL;DR

• Used-car leasing is a major growth opportunity, but many established leasing firms are struggling to capitalise.
• Internal barriers like legacy IT systems, outdated risk models, and rigid organisational culture are stalling innovation and profitability.
• Up to 75% of IT budgets are spent on maintaining outdated systems, leaving little room for transformation.
• Traditional residual value models fail to capture today’s volatility especially with EVs, where resale values have dropped up to 34%.
• Cultural resistance and fragmented customer experiences lead to high abandonment rates and slow adaptation.
• Companies that embrace structured innovation, advanced forecasting, and digital self-serve tools are outperforming incumbents.
• The most competitive players are running pilot programmes, modernising tech stacks, and building future-ready leasing models, one frictionless experience at a time.

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Legacy IT Systems & Fragmented Architecture

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The foundation of any successful leasing operation lies in its technology infrastructure. Unfortunately, many established leasing firms operate on a patchwork of legacy systems that weren't designed for today's digital-first world.

Customer-facing representatives often juggle seven or more systems per interaction, creating inefficiencies that ripple through the entire organisation. Manual processes dominate workflows, whilst data exists in isolated silos that prevent comprehensive customer insights. The result? Digital progress stalls as companies become trapped in maintenance mode.

The financial impact is staggering. Some companies spend up to 75% of their IT budget simply maintaining legacy systems, leaving minimal resources for innovation or growth initiatives. This creates a vicious cycle where outdated infrastructure prevents the very investments needed to modernise operations.

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Breaking Free from Technical Debt

The solution begins with honest assessment. Conduct a comprehensive tech inventory and map your technical debt to understand the true cost of maintaining current systems. This analysis reveals which systems are genuinely mission-critical and which are simply expensive to replace.

Low-code platforms and APIs offer a pragmatic path forward. Rather than attempting costly full-scale replacements, these tools enable you to layer modern interfaces over legacy systems, creating immediate improvements in user experience whilst preserving valuable data and processes.

Consider the approach taken by an industrial leasing firm that rebuilt their data platform in 12 months using modern APIs and cloud infrastructure. This investment enabled full digital quoting within year one, dramatically improving both customer experience and operational efficiency.

The key is starting with customer-facing processes that deliver immediate value, then gradually modernising back-end systems as resources permit. This approach minimises disruption whilst building momentum for broader transformation.

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Outdated Risk & Residual-Value Models

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Traditional risk models were built for a world of predictable depreciation patterns. Today's volatile automotive market, particularly with electric vehicles, has shattered these assumptions, leaving many leasing companies exposed to significant financial risk.

The scale of this challenge is evident in recent market data. EV resale values fell up to 34% in some European markets which is far steeper than traditional ICE vehicles. Existing risk models, calibrated for gradual, predictable depreciation, simply cannot cope with such volatility.

This represents both a significant challenge and a substantial opportunity. Companies that can develop more sophisticated forecasting capabilities will gain a competitive advantage, whilst those clinging to outdated models face increasing losses.

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Embracing Advanced Forecasting

Modern risk management requires AI-based forecasting tools that can process real-time market data, economic indicators, and emerging trends. These systems can identify patterns that traditional models miss, enabling more accurate pricing and risk assessment.

Asymmetric cost functions, which treat over-pricing and under-pricing errors differently, can reduce costs by 8% or more. By minimising the most expensive types of pricing errors, these models improve both competitiveness and profitability.

The most successful companies create feedback loops between real-world sales data and risk modeling. This continuous learning approach enables models to adapt quickly to changing market conditions, rather than relying on historical patterns that may no longer apply.

Building these capabilities requires investment in both technology and talent. However, the cost of inaction, continued exposure to volatile markets with inadequate tools is far greater than the investment required to modernise risk management.

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Traditional Mindsets & Siloed Innovation

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Perhaps the most challenging barrier is cultural. Many established leasing firms maintain a traditional mindset that views used vehicles as "lesser value" products, limiting investment in this growing segment.

This perspective creates a self-fulfilling prophecy. Limited investment leads to poor customer experiences, which reinforce the belief that used-car leasing isn't profitable. Meanwhile, digital-native competitors, unburdened by these assumptions, capture market share with innovative approaches.

Legacy leasing firms often struggle to match the agility of newer players. Without the nimbleness provided by blank-slate innovation, it's easy to underestimate the difficulty of right-pricing used cars and creating compelling customer experiences.

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Fostering Innovation Culture

Breaking free from traditional thinking requires structured innovation approaches. Internal innovation labs or digital-first joint ventures can provide the freedom to experiment without constraints imposed by legacy systems and processes.

Sandbox thinking proves particularly valuable. Run pilot leasing programmes with new rules, outside legacy constraints. This approach allows teams to test innovative concepts without risking core business operations.

Mobility leaders like Sixt have successfully embraced digital platforms for multi-cycle leasing and asset reuse. Their success stems from treating used vehicles as strategic assets rather than disposal problems, investing in technology and processes that maximise their value.

The key is creating protected spaces for innovation whilst maintaining operational excellence in core business areas. This dual approach enables experimentation without compromising existing customer relationships or revenue streams.

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Poor Customer Experience & Digital Friction

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Backend complexity often translates into cumbersome customer journeys that damage conversion rates and brand perception. The impact is measurable: over 30% of leasing journeys are abandoned due to digital friction or lack of transparency.

Customers expect seamless digital experiences comparable to other industries. When leasing companies fail to deliver due to fragmented systems, manual processes, or poor interface design, they lose potential customers to more agile competitors.

The problem extends beyond initial applications. Ongoing customer management, from contract modifications to end-of-lease processes, often involves multiple touchpoints, phone calls, and paper-based workflows that frustrate customers and increase operational costs.

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Delivering Seamless Digital Experiences

Modern customers expect digital self-serve options, real-time pricing, and transparent processes. Chatbots, e-signatures, and automated workflows can dramatically improve customer experience whilst reducing operational costs.

White-label customer portals offer a practical solution. These platforms can connect via APIs to existing systems without requiring complete platform rebuilds, enabling significant improvements in customer experience with manageable investment.

The focus should be on removing friction at every stage of the customer journey. This includes simplified application processes, transparent pricing, clear communication about vehicle availability, and streamlined contract management.

Success requires viewing the customer journey holistically rather than optimising individual touchpoints in isolation. Each interaction should build toward a seamless experience that encourages customer loyalty and referrals.

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Cultural Resistance to Risk-Taking & Change

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Fear of losses from rapid changes in used car values, particularly for EVs, creates paralysis in many leasing organisations. This risk aversion prevents the experimentation and innovation necessary to succeed in dynamic markets.

The concern isn't unfounded. Some European lessors have signalled they may exit the EV leasing market entirely if risk isn't adequately shared or mitigated. However, complete withdrawal from growth segments rarely proves successful in the long term.

This defensive mindset creates a strategic trap. Companies that avoid risk also avoid opportunity, gradually losing market position to competitors willing to innovate and adapt.

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Balancing Innovation with Risk Management

The solution lies in structured risk-taking rather than risk avoidance. Start with small-scale pilot programmes that have clear metrics for both risk and potential upside. This approach enables learning whilst limiting exposure.

OEM and fintech partnerships can provide valuable risk-sharing opportunities. Co-investment in pilot portfolios allows traditional leasing companies to experiment with new models whilst distributing risk across multiple stakeholders.

Set measurable KPIs such as percentage of portfolio in new-model used leasing over 12-18 months. This creates accountability whilst providing clear success criteria for expansion decisions.

The goal isn't to eliminate risk entirely; that's impossible in a dynamic market. Instead, focus on building capabilities that enable intelligent risk-taking and rapid adaptation to changing conditions.

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Regulatory Complexity & Compliance Burden

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Whilst not always the primary barrier, regulatory compliance adds layers of complexity that can slow innovation and increase costs. Different markets have varying requirements for consumer protection, data privacy, and financial services regulation.

This complexity particularly impacts companies operating across multiple jurisdictions, where compliance requirements may conflict or create operational inefficiencies. The cost of ensuring compliance can consume resources that might otherwise support growth initiatives.

However, regulatory requirements also create opportunities for competitive advantage. Companies that build robust compliance capabilities can operate more freely whilst competitors struggle with regulatory uncertainty.

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Building Compliance as Competitive Advantage

View compliance as a strategic capability rather than a burden. Invest in systems and processes that ensure regulatory adherence whilst enabling operational flexibility.

Automated compliance monitoring can reduce costs whilst improving accuracy. These systems can track regulatory changes, assess impact, and ensure ongoing compliance without manual intervention.

Consider regulatory requirements early in product development rather than as an afterthought. This approach prevents costly redesigns and enables faster market entry.

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Unlocking Growth Through Strategic Transformation

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The barriers preventing leasing companies from profiting off used-car leasing are significant but not insurmountable. Success requires a systematic approach that addresses technology, risk management, culture, and customer experience simultaneously.

Companies that tackle these challenges will discover that solving internal barriers opens doors to both growth and operational efficiency. The same investments that enable used-car leasing success also improve performance across other business areas.

The automotive industry is experiencing unprecedented change. Traditional leasing companies have valuable assets like customer relationships, industry expertise, and financial resources, that provide advantages over newer competitors. However, these advantages only matter if companies can adapt quickly enough to capitalise on emerging opportunities.

The time for incremental change has passed. Market leaders will be those that embrace comprehensive transformation, viewing current challenges as opportunities to build more resilient, profitable businesses. Start with pilot programmes, measure results rigorously, and scale what works whilst learning from what doesn't.

Your next customer is comparing your offering to digital-native competitors right now. The question isn't whether transformation is necessary; it's whether you'll lead the change or be forced to follow.

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