Americans Loving Their Leases, Not so Much Their Loans

Steph Willems
by Steph Willems
americans loving their leases not so much their loans

Good times have clearly arrived, because Americans are flinging money at cars like it’s going out of style.

Leasing has never been more popular for American car buyers, reports the Detroit Free Press, and the size of their auto loans have also reached record territory.

According to industry data tabulator Experian Automotive, 33.6 percent of new car and truck purchases in the fourth quarter of 2015 were leases, with average vehicle loans hitting $29,551. The findings aren’t surprising when you consider the combination of growing economy, low interest rates and cheap gas prices spurred record vehicle sales last year.

“In order to stay within their budget goals we have seen that more consumers are turning to leasing and used vehicles as alternatives,” explained Melinda Zabritski, Experian senior director of automotive finance.

However, more buyers are also discovering their vehicle desires aren’t aligned with the reality of their bank balance.

Fitch Ratings noted last month that a growing number of subprime auto loans are becoming delinquent by 60 days or more, a condition fueled in part by easy-to-access credit and lower used car prices.

In February, the delinquency rate for subprime auto loans stood at 4.98 percent, passing the 4.87 percent recorded in September 2009. The percentage of loans seen as likely to default grew as well — 8.72 percent in January — and is expected to hit 10 percent by the end of this year.

More than one-in-five Americans taking out a car loan have a low or very low credit rating, resulting in a higher fixed interest rate on the loan. Couple that with the 72 month loan periods many sellers offer in the interest of advertising a low monthly payment, and many economically vulnerable citizens are buying cars only to find themselves unable to pay due to work or health circumstances.

While the trend in the default rate seems concerning, Fitch says the depth of the recession saw rates at 13 percent, so a crisis point is far from being reached.

Comments
Join the conversation
2 of 153 comments
  • Corollaman Corollaman on Mar 04, 2016

    Haven't made a car payment since 2002. Don't miss it at all. When it's time to replace, I have enough saved to buy something used.

  • CincyDavid CincyDavid on Mar 07, 2016

    Our household is a mish-mash...3 cars we own outright, including my 20 year old Volvo wagon with 205,000 miles. We also lease two Hondas, largely because my wife and step-daughter have NO mechanical aptitude and having newish cars keeps them happy, AND prevents brain damage on my part...no more "it won't start" calls. I am at an age and stage that the cheap Honda leases are sounding more and more seductive...our 2016 CR-V costs $265/mo with no money down...put gas in it, coupla tire rotations, 5-6 oil changes and in 2019 it goes back, to be turned in for a new shiny toy of my wife's choosing. The cost per mile on my older cars is pretty low, but I also won't be crawling around under a new Honda putting brake hoses on it...

  • SilverCoupe I am one of those people whose Venn diagram of interests would include Audis and Formula One.I am not so much into Forums, though. I spend enough time just watching the races.
  • Jeff S Definitely and very soon. Build a hybrid pickup and price it in the Maverick price range. Toyota if they can do this soon could grab the No 1 spot from Maverick.
  • MaintenanceCosts Would be a neat car if restored, and a lot of good parts are there. But also a lot of very challenging obstacles, even just from what we can see from the pictures. It's going to be hard to justify a restoration financially.
  • Jeff S Ford was in a slump during this era and its savior was a few years away from being introduced. The 1986 Taurus and Sable saved Ford from bankruptcy and Ford bet the farm on them. Ford was also helped by the 1985 downsize front wheel drive full sized GM cars. Lincoln even spoofed these new full size GM cars in an ad basically showing it was hard to tell the difference between a Cadillac, Buick, and Oldsmobile. This not only helped Lincoln sales but Mercury Grand Marquis and Ford Crown Victoria sales. For GM full size buyers that liked the downsized GM full size 77 to 84 they had the Panther based Lincoln Town Cars, Mercury Grand Marquis, and Ford Crown Victorias that were an alternative to the new GM front wheel drive full size cars that had many issues when they were introduced in 1985 and many of those issues were not resolved for several years. The Marks were losing popularity after the Mark Vs.
  • SCE to AUX Toyota the follower, as usual. It will be 5 years before such a vehicle is available.I can't think of anything innovative from them since the Gen 1 Prius. Even their mythical solid state battery remains vaporware.They look like pre-2009 General Motors. They could fall hard.
Next