Experian Automotive reported recently that in the first quarter, U.S. car buyers were willing to pay more per month for new light vehicles. They are also willing to finance more for more expensive vehicles. Loan terms and leasing also hit record highs, showing that consumers are more willing to extend themselves for higher end vehicles.
Senior director of automotive credit for Experian Automotive said this in a recent statement: “As the cost of purchasing a new vehicle continues to rise, consumers clearly are stretching the loan term to help lower monthly payments.” According to Experian, the new average for a new vehicle loan was 66 months for the period of January through March. A year earlier it was 65 months. For used vehicles, the new average is 61 months, up from 60 months in the first quarter of 2013.
Monthly payments for new cars are also up 3.3 percent over last year, making the average $474. For used vehicles, monthly payments are up 1.1 percent at $352. Also showing increases are the average amount financed is $27,612, which is up $964, or 3.6 percent for a new vehicle. The average amount financed is also up 2.3 percent for used vehicles to $17,927, which is an increase of $395.
According to Experian Automotive, leasing has reached a new high since tracking of it began in 2006. In the first quarter of 2014, leasing accounted for 25.6 percent of all new vehicle sales. This is the first year that leasing exceeded 25% since the first year of tracking. During the first quarter of 2013, leasing accounted for 24.2 percent of all new vehicle sales.
On the other hand, monthly lease payments are slightly down from the first quarter of 2013 at $412. With lower monthly payments, leasing is a much more attractive option. Zabritski said, “Over the last several quarters, leasing has come back as a very desirable option for consumers.” Leasing enables new car buyers to get more car for less money, offering attractive monthly payments based on the depreciation of the vehicle rather than the entire cost of the vehicle.