Americans Loving Their Leases, Not so Much Their Loans

Steph Willems
by Steph Willems

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.

Steph Willems
Steph Willems

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  • 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...

  • Jkross22 Tim Apple sniffing around to see if he can sucker someone else into under-RAM'ing devices to save $2/unit and force upgrade people.
  • Jkross22 Not to rub salt in the wound, but why would you put your hq in some extraordinarily expensive real estate like Manhattan Beach? I know little of Fisker the person, but this reeks of ego and the desire for appearances.
  • 3-On-The-Tree I’ve responded to several bike accidents where if the guy wasn’t wearing a helmet he would’ve been in a casket. Plus it saves your hearing.
  • Wjtinfwb Nice cars and a find if you're into Radwood type iron. But a near 40 year old anything, even something as robust as a Legend is going to have failure points that would be prohibitively expensive to fix. Electronics, A/C, leaky old gaskets, creaking suspension bushing etc., not to mention the lack of safety gear and an interior that no doubt has "seen a lot". I applaud the manual transmission, but you could likely find something 30 years newer for not much more money to hone your heel and toe skills on before graduating to a more expensive ride.
  • ScarecrowRepair Considering how over-priced Apple products are, I doubt a cheap Rivian is in the works.
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