Jun 10, 2013 Philip Burgess
More Americans are turning to auto leasing over buying when it comes to acquiring a new vehicle, with short term lending a viable funding option.
According to Experian Automotive, auto leasing encompassed 27.5 percent of all new vehicle transactions during the first quarter of 2013. That's an increase from the 24.4 percent of auto dealings backed by leasing in the first quarter of 2012. Also, the average monthly payment decreased by $3 in that period.
Auto loan providers are seeing healthy activity from the development as American consumers get back on their feet in the wake of the Great Recession. Experts with the source noted that the industry is finally seeing solid signs of recovery, with frugal buyers populating the market.
"Consumers tend to shop for vehicles based within the limits of their budget, and leasing is often seen as a viable path to a lower monthly payment," Melinda Zabritski, senior director of Automotive Credit said in a statement. "Lenders have seen overall stability come back to the market since the recession, and leasing has gradually returned as a larger part of many lender strategies."
One of the positive by-products of the economic downturn of recent years may be that consumers are starting to pay more attention to their personal finances. This could allow lenders to provide more favorable loan terms due to a decreased risk of default. It's advantageous for both borrowers and lenders.
Leasing terms to boost electric cars
In an attempt to increase lagging electric car sales, auto companies have started to offer more favorable leasing conditions. The Associated Press reported that Honda is lowering its monthly lease rate for the Fit EV model. In addition, the automaker is including several features free-of-charge, including home charging stations, which hold a $995 value.
The Fit EV will be able to be leased for as little as $259 per month. General Motors is offering an even lower monthly fee for its Spark EV model, with consumers in California and Oregon able to lease to car for just $199 per month.
With such deals, electric car transactions may increase in the near future. For lenders, the task at hand could be how to take advantage of the potential spike in activity. With automakers offering such discounted rates, it could force lenders to offer better terms on the already reasonable offerings Experian noted. It could create a competitive leasing environment if consumers opt for electric vehicles.