With new vehicle prices climbing to all-time highs, a record number of Americans are turning to leases in a bid to keep monthly payments as low as possible.
"The difference between a monthly payment for those leasing a new vehicle versus those who buy new is almost $100," said Melinda Zabritski, senior director of Experian Automotive.
Officially, the latest report on automotive lending by Experian Automotive found the average new vehicle lease monthly payment in the first quarter was $405 while the average monthly payment for a new vehicle loan was $488.
In addition, while the average monthly payment for those buying a new vehicle increased $14, the average monthly payment for those leasing actually fell $7 compared to the same time last year.
The numbers help explain why Experian found an all-time high of 31.46 percent of new vehicles financed in the first quarter were leased. Just five years ago, Experian says, the percentage of new vehicles leased was 24.05 percent.
"Leasing has become more popular because the price of vehicles continues to go up," Zabritski said. "Consumers are looking for lower monthly payments, which is why more of them are extending the terms of their loans."
In the first quarter, the average length of new vehicle loans hit an all-time high of five years and seven months, according to the report. Furthermore, a record 29.5 percent of those taking out a new vehicle loan stretched their loans out between six and seven years, according to Experian. The report also found an 18.6 percent increase in those new vehicle loans with terms between 73 and 84 months.
The primary factor driving the move to longer auto loans and more leasing is the rising cost of new cars, trucks and SUVs.
With the average vehicle transaction price (what's paid at a dealership) climbing above $31,000, according to numerous auto industry analysts, the amount consumers are financing has hit an all-time, Experian said. In fact, the report found the average amount financed for a new vehicle loan in the first quarter jumped more than $1,000 to a record high of $28,711.
Experian says the average amount financed for a used vehicle bought in the first quarter was $18,218, an increase of almost $300.
Despite the increase in new and used vehicle prices, the percentage of loans in delinquency or ending in default with the vehicle being repossessed has actually dropped in the last year.
"This is still a very healthy auto market with strong fundamentals," Zabritski said.
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