Leasing a car more popular, high-credit consumers choosing to lease more than 30% of the time
Used vehicle prices are going down, but high interest rates drive up monthly payments
Written by
Writer, Fox Money
Christopher Murray has over six years in personal finance whose byline has been featured by Bankrate, MoneyCrashers, FinanceBuzz, Investor Junkie, and Time.
Updated October 16, 2024, 3:03 AM EDT
Likely due to high car prices that have stuck around since the height of the pandemic, many drivers now lease their vehicles instead of financing them, according to Experian’s State of the Automotive Finance Market Q1 report.
Borrowers with higher credit scores favor leasing more often. Super Prime and Prime+ consumers choose to lease over 30% of the time. That percentage drops to just over 23% for subprime consumers.
Certain states saw more vehicle leases than others in the first quarter. New York and New Jersey had the highest percentage of leases over finances. States that had the fewest number of leases were Arkansas, Oklahoma and Wyoming.
Out of the many auto brands, Honda is number one for car leases with 11.75% of vehicles leased being Honda models. After Honda, various Toyota models are the most leased. Rounding out the top five most leased brands are Chevy, Nissan and BMW. Certain makes and models are more affordable to lease, particularly when compared to buying outright. Honda CR-Vs, for example, cost $480 to lease, on average, compared to $639 when financed.
Tesla Model Ys are also more affordable to lease versus buy, and cost $528 to lease but $681 to finance with loan. A Nissan Rogue, which typically costs $588 to buy, costs just $445 to lease, Experian reports.
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Used vehicle loans decrease, but higher interest rates raise monthly payments
Drivers who do choose to buy their vehicles are seeing prices decline, at least on used cars. Overall loan amounts for used vehicles decreased in Q1, according to Experian’s research. The good news stops there, though, as interest rates have continued to push monthly payments higher.
Back in 2021, the average amount drivers spent on financing used cars was $22,355. That jumped to $26,571 in 2023. At the beginning of the year, this average dropped slightly to $26,073.
Rates, however, are offsetting the lowering prices. Vehicle loan rates are currently 11.91% on average, compared to 11.40% in 2023 and just 8.87% in 2021. Monthly payments for used cars aren’t lowering just yet thanks to these rising rates. Average payments in 2021 were just over $400. Now, many drivers pay an average of $523 each month.
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Biden’s new fuel efficiency rules intend to save Americans over $23 billion in fuels costs
President Biden recently released finalized fuel economy rules that are set to save Americans billions in gas costs. The rule will slowly increase the required fuel economy for certain vehicle models.
The fuel economy on passenger cars will increase by 2% per year for model years 2027 to 2031. Light trucks' fuel economy will also increase by 2%, but only for models from 2029 to 2031. Starting in 2031, the fuel economy on light-duty trucks and passenger vehicles will be about 50.4 miles per gallon. This will save vehicle owners over $600 in fuel over the lifetime of their vehicles.
The fuel economy for heavy-duty trucks will also rise, along a slightly longer timeline. Trucks and vans will see their fuel efficiency increase 10% per year for models between the years 2030-2032 and 8% per year for model years 2033-2035. These increases will mean an average of 35 MPG across all heavy-duty trucks and vans, saving drivers more than $700 in fuel over the lifetime of their vehicles.
"Not only will these new standards save Americans money at the pump every time they fill up, they will also decrease harmful pollution and make America less reliant on foreign oil," U.S. Transportation Secretary Pete Buttigieg said.
As a way to help contribute to anti-pollution efforts, these new standards will prevent nearly 710 million metric tons of carbon dioxide emissions by 2050.
"President Biden’s economic and climate agenda has catalyzed an American clean energy and manufacturing boom," said the National Climate Advisor, Ali Zaidi. "From day one, the President has centered America’s workers, and unions that built our middle class, in this transformative agenda, positioning the U.S. auto sector as a leader in the world. The President’s agenda is working. On factory floors across the nation, our autoworkers are making cars and trucks that give American drivers more choices today than ever before."
"These fuel economy standards, rigorously aligned with our investments and standards across the federal government, deliver on the Biden-Harris Administration’s promise to build on this momentum and continue to spur job creation, and move faster and faster to tackle the climate crisis," Zaidi continued.
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