Since the downturn, the combination of attractive lease deals, pent-up consumer demand, and easy credit availability have pushed sales higher, according to an industry report by White Clarke Group released last week.
Light-vehicle sales in the U.S. have delivered seven consecutive annual gains since the financial crash — marking the longest upwards streak in decades. The National Automobile Dealers Association is forecasting total sales of 17.1 million new cars and light trucks in 2017, according to the report.
Consumers continue to show an “insatiable appetite” for new cars and light trucks, funded through “cheap finance,” White Clarke stated in the report.
The average loan amount for new vehicles reached a record high last year, at $30,621, according to Experian. Used-vehicle finance also reached new peaks, at $19,329 per car. As such, consumers are turning to longer-term loans. The average new-vehicle loan is 0.52 months longer than it was the year prior, while used-vehicle loans are 0.24 months longer on average during the same span, according to Experian.
“With the average loan amount for new and used vehicles hitting all-time highs, we are seeing the need for affordability drive consumer purchasing behavior,” Melinda Zabritski, Experian’s senior director of automotive finance, said in the report. “Our latest research shows an $11,000 gap between the average loan amount on new and used vehicles — the widest we have ever seen.”
This trend is causing many consumers to find alternative methods like getting a short-term lease, opting for a used vehicle, or extending loan terms. Leasing is still considered the “cheapest monthly solution to fund a vehicle,” according to the report. The average monthly rental for a new, leased vehicle is $414, Experian said in the report, as compared to $506 for a new- vehicle purchase.
Additionally, down payments have also increased, “to the point where the percentage of car sales that are financed has declined for the first time in a decade,” added Lou Loquasto, vice president of auto at Equifax.
“Currently it is 85% new and 55% used [in terms of the proportion of car sales that are financed], but a three-year-old car today is such good quality that customers may switch to used-car finance instead,” Loquasto said. “Annual car sales used to be two-thirds used and one-third new, but I could envisage that becoming 70% used and 30% new.”
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