Experian: Leasing Maintains Record Pace in Q3
Consumers continued to lease vehicles at a record pace in the third quarter, while captives claimed their largest share of new-vehicle financing since the Great Recession.
SCHAUMBURG, Ill. — Experian Automotive reported today that the percentage of vehicles leased during the third quarter reached its highest point since the firm began tracking auto finance data in 2006, accounting for nearly 27% of all new-vehicle transactions.
The firm also noted that the average month lease payment during the quarter rose by $1 from a year ago to $389, making the transaction type a viable option for payment-conscience car buyers as vehicle prices continue to rise.
“While consumers can save an average of $84 per month by leasing rather than taking out a loan on a new vehicle, they should make sure leasing fits their lifestyle,” noted Melinda Zabritski, Experian’s senior director of automotive finance. “Oftentimes, there are mileage caps and other considerations that consumers should familiarize themselves with before entering into a leasing agreement.”
Rising vehicle prices drove loan amounts to record levels in the third quarter, with the average amount financed during the period rising $1,137 from a year ago to $28,936. For used, the average amount financed rose by $290 from a year ago to $18,866. Experian also noted that the gap between new and used loan amounts continued to widen, with consumers able to finance a used vehicle for $10,070 less than a new one.
To keep their payments down, consumers financed their vehicles at record terms. For new vehicles, approximately 44% of car buyers took out loans with terms between 61 and 72 months. For used, 41% of buyers financed their purchased for the same duration. The percentage of car buyers agreeing to even longer terms also increased.
According to Experian, auto loans with terms between 73 and 84 months accounted for 25.7% of vehicles financed in the third quarter, a 17.1% increase from a year ago. For used, loans with terms between 73 and 84 months reached an all-time high, accounting for 16.2% of all used vehicles financed in the third quarter — a 12% increase from a year ago.
Experian also noted that one of the biggest shifts in the auto finance industry during the third quarter was the resurgence of captive finance sources, which claimed their largest share of new-vehicle financing since the Great Recession. They accounted for 51.6% of all new vehicles financed in the third quarter, up from 36.8% in the third quarter 2011.
Banks continued to hold the largest share of new- and used-vehicle loans combined at 34.7%. Finance sources, which traditionally play in the subprime and deep-subprime categories, accounted for 13.34% of all vehicles financed in the third quarter, a 6.4% increase from a year ago.
“Captive lending has made a comeback since suffering a steep drop-off caused by declining new sales and lender-type shifts during the recession,” Zabritski noted. “This is good news for manufacturers, as their captive finance companies often provide an additional source of revenue as well as a pipeline to credit for their dealer networks.”
As for monthly payments, the average for new vehicles financed during the third quarter increased $12 from a year ago $482. For used, payments rose $3 to $361. Additionally, the average credit score for a new-vehicle loan fell to 710, the lowest level since the third quarter 2007. The average interest rate for a new vehicle was 4.63%, while the average for used was 8.76%
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