A recent Experian report found that leasing a car has risen over five percentage points in the last two years due to its flexibility and affordability concerns.
The Illinois-based company’s State of the Automotive Finance Market Report: Q2 2024, found that leasing at a 25.4 percent rate, up from 21.1 percent last year and 19.3 percent in Q2 2022.
Accounting for this is that the average monthly payment for a leased vehicle declined across all credit risk tiers in this year’s second quarter. Super prime borrowers saw the average monthly payment decrease from $601 to $586 year-over-year, prime borrowers experiencing a drop from $596 to $583, and the average monthly payment for subprime borrowers reaching $597 this quarter, down from $611 last year.
Additionally, the average monthly payment for a leased vehicle was $148 less than a loan in the second quarter of 2023.
Top Models
“As the influx of new vehicle inventory persists, a wider range of models are becoming available and dealers and manufacturers are leaning back into leasing as a way to move metal,” said Melinda Zabritski, Experian’s head of automotive financial insights, in a press statement released with the report.
“While vehicle prices remain elevated, leasing offers consumers the appeal of a lower monthly payment, part of the reason for the renewed interest.”
Among the top leased models in April, May and June, the Honda CR-V continued to lead at 3.0 percent, followed by the Tesla Model Y (2.6 percent) and Honda Civic (2.3 percent). Rounding out the top five were the Ford F-150 (2.0 percent) and Chevrolet Silverado 1500 (1.9 percent).
Loan Growths
The average loan amount for a new vehicle saw a slight increase to $40,927, up from $40,743 a year earlier, and the average interest rate went from 6.78 percent to 6.84 percent year-over-year. However, the average monthly payment for a new vehicle saw a $1 increase to $734 for the time period.
For pre-owned vehicles, the average loan amount declined $1,068 year-over-year to $26,248 in the last quarter as the average interest rate grew from 11.5 percent last year to 12.0 percent this quarter. But despite the increase in rates, the average monthly payment dropped $11 to $525 over the same period.
Noted findings
Other highlights that the authors of the report pointed to were:
- Prime and super prime borrowers comprised nearly 70 percent of the total finance market in Q2 2024.
- New vehicle financing increased to 80.1 percent this quarter, from 79.9 percent last year and used vehicle financing declined from 39.0 percent to 35.8 percent year-over-year.
- Average loan terms for new vehicles grew from 68.3 months in Q2 2023 to 68.5 months in Q2 2024
- 60-day delinquencies saw a slight uptick to 0.85 percent this quarter from 0.83 percent last year.
Captive Market
Captives—banks and leasing companies affiliated with car manufacturers—remained at the forefront of total automotive finance market share, rising to 30.9 percent, from 28.5 percent last year. Meanwhile, banks declined to 24.4 percent from 24.7 percent and credit unions came in at 20.2 percent, down from 23.3 percent a year earlier.
Additionally, captives captured over half of the new vehicle finance market share, coming in at 60.6 percent this quarter, up from 57.3 percent last year. Banks dropped to 21.3 percent from 22.4 percent and credit unions went to 10.3 percent from 14.4 percent in the same time frame.
For the used vehicle finance market share, credit unions comprised 27.6 percent in the last quarter, down from 29.5 percent for the same timeframe a year earlier. Banks were not far behind at 26.8 percent this quarter, up from 26.2 percent last year and captives slightly grew to 8.5 percent from 8.4 percent .
“With captives continuing to offer incentives, it’s expected to see their share grow across the spectrum,” Zabritski continued. “Monitoring the shift in consumer preferences and how it affects the overall market share is important for professionals as they make informed decisions when assisting their respective shoppers.”
