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How Much Do Consumers Value Fuel Cost Savings? Evidence from Passenger Vehicle Leasing

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  • Ankney, Kevin
  • Leard, Benjamin

    (Resources for the Future)

Abstract

Vehicle leasing involves a consumer renting a car for about three years. Given the typical lease length, we show that estimating valuation of leased vehicle fuel cost savings is fundamentally different from estimating valuation of purchased vehicle fuel cost savings. We find that new vehicle lessees and buyers undervalue lifetime fuel cost savings. But because leasing periods last around three years, new vehicle lessees fully value lease-specific fuel cost savings. Our estimates also imply that leasing companies set residual values, defined as a vehicle’s post-lease expected value, with the expectation that used vehicle buyers undervalue post-lease fuel cost savings.

Suggested Citation

  • Ankney, Kevin & Leard, Benjamin, 2021. "How Much Do Consumers Value Fuel Cost Savings? Evidence from Passenger Vehicle Leasing," RFF Working Paper Series 21-27, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-21-27
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    File URL: https://www.rff.org/documents/3902/WP_21-27_April_2023_Update.pdf
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    References listed on IDEAS

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