As the automotive market undergoes major shifts, affordability remains a critical challenge for consumers. However, recent trends in leasing and cash transactions suggest that some alternatives are helping to ease financial pressures. In a recent episode of CBT Now, Melinda Zabritski, Experian’s Head of Automotive Financial Insights, shared valuable insights from Experian’s Q2 2024 Automotive Finance Market Report, shedding light on evolving consumer behaviors in response to rising car prices.
Key Findings from Experian’s Q2 2024 Automotive Finance Market Report
- Surge in Cash Transactions: Cash purchases have become increasingly common, particularly in the used-car market, where they’ve reached a record high of 62%. Cash transactions for new vehicles are also steady at 20%. This shift toward cash buying is largely due to the increasing age of used vehicles, which are often more affordable and accessible for cash buyers. This trend highlights a consumer preference for outright ownership as a means to manage financial strain and avoid monthly loan commitments.
- Leasing Makes a Comeback: Leasing has rebounded significantly, now accounting for 25% of new vehicle purchases, a notable increase from 17% during previous inventory shortages. This resurgence is attributed to improved inventory levels and incentives that make leasing a more affordable alternative to traditional financing. According to Zabritski, leasing can reduce monthly payments by up to $150 compared to loans, making it an appealing option for consumers facing budget constraints.
- Shift in Vehicle Types for Leasing: The types of vehicles being leased have also shifted. SUVs have gained traction, comprising 15% of all leases, while truck leases have declined from 14% to 11%. The rise in SUV leasing reflects growing consumer interest in versatile, family-friendly vehicles that offer both comfort and practicality.
- Rise in EV Leasing: Electric vehicle (EV) leasing is on the rise, driven by tax credits and incentives that help lower monthly payments. As EV infrastructure and model options expand, more consumers are considering leasing as a practical way to enter the EV market affordably.
- Current Delinquency Landscape: Despite rising delinquency rates, with 1% of balances now 60 days past due, Zabritski emphasized that the industry is better positioned to manage this than during the 2009 financial crisis. Factors like elevated used-vehicle values and reduced severity of loan losses are contributing to the sector’s resilience.
The Big Picture
Zabritski’s insights suggest that while affordability challenges remain, consumer strategies are evolving. “Affordability still remains a concern, but we’ve seen cash purchases for used vehicles hit a record high of 62% in Q2 2024, while leasing is making a respectable comeback at 25%, offering consumers a way to lower their payments by around $150 on average,” she noted.
This positive shift in consumer finance behavior is supported by a more balanced automotive market, where supply and demand are slowly stabilizing after years of disruption. Recent Federal Reserve interest rate cuts have further encouraged consumers to re-enter the market, offering a glimpse of optimism for both buyers and dealers.
Source: CBT News
