Leasing, Loan Amounts Up; Credit Scores Down

U.S. consumers continue to lease vehicles at a record pace, according to Experian’s third-quarter auto finance report.

Leasing accounted for nearly 27% of new-vehicle transactions, up from 24.7% last year.

It marks the highest lease percentage rate since Experian began tracking such data publicly in 2006. The new report indicates the average monthly lease payment was $398, up $1 from a year ago.

“As the price for a new or used vehicle continues to rise, leasing has become a more viable financing option for consumers looking to maintain an affordable monthly payment,” says Melinda Zabritski, Experian’s senior director-automotive finance.

But she offers this tip. “While consumers can save an average of $84 per month by leasing rather than taking out a loan on a new vehicle, they should make sure leasing fits their lifestyle.

“Oftentimes there are mileage caps and other considerations that consumers should familiarize themselves with before entering into a leasing agreement.”

The quarterly report also says rising vehicle prices account for record loan amounts for new and used vehicles.

The average amount financed for a new vehicle was $28,936, up $1,137 from the previous year. The average amount financed for a used vehicle was $18,866, up $290 over the same time period.

On average, consumers finance $10,070 less on a used vehicle than on a new one.

Extending loan terms is another way consumers have tried to keep monthly payments low.

During the third quarter, the percentage of consumers who took out new and used vehicle loans with terms between 61 and 72 months reached all-time highs.

Some observers express concern about long-term loans, saying they can increase risks and take consumers out of the market too long. On the other hand, “long-term loans won’t necessarily pull the consumer out,” says Jonathan Banks, a National Automobile Dealers Assn. analyst. “They usually come back in 60 months.

“And vehicles last longer now. Before, they were worth next to nothing towards the end of a loan.”

For new vehicles, about 44% of consumers took out 61- to 72-month loans. More than 41% financed a used vehicle for that long.

The percentage of consumers extending their loans even longer also has increased. Loans for new vehicles extending 73 to 84 months increased 17.1% over the previous year, reaching a record high of 27.5%.

Used vehicle loans of that length reached an all-time high of 16.2% (a 12% increase over the previous year).

Other quarterly findings:

•The percentage of new-vehicle financing hit a record 86.6%.

•The average new-vehicle buyer’s credit score fell to 710, the lowest since 2007.

•The average $482 new-vehicle monthly payment was up $12 from the previous year. The average $361 used-vehicle payment was up $3.

•The average interest rate was 4.63% for a new vehicle, 8.76% for a used vehicle.

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