More people are opting to lease their new set of wheels instead of purchase them, according to Q1 2016 data from Experian.
The number of auto loans grew to an all-time high, with leasing surpassing 30% of all new consumer vehicle sales. But the interest rates consumers are getting on these loans has stayed low, especially for used cars. In fact, Experian reported that average loan rates saw some increases, but still remain historically low.
Loan rates for a new car in Q1 of 2016 was 4.79%, up from 0.08% a year prior. Franchise used rates are 7.81% (down from 8.03% in Q1 2015) while independent used rates are 12.22% (down only 0.01% from Q1 2015).
The Experian Automotive scoring deems prime consumers as those with scores of 661 to 850, nonprime users with scores of 601 to 660, and subprime users as those with scores of 300 to 600. Consumers on all risk tiers are increasingly choosing to lease over purchasing cars, according to the report.
The number of prime consumers choosing used vehicles increased from 31.5% in Q1 2015 to 36.3% in Q1 2016. The number of nonprime and subprime consumers also saw increases, from 30.1% to 34.2% and 22.5% to 27.2%, respectively.
Experian reported that the increased number of prime consumers choosing used vehicles resulted in “score increases, greater percentages of used financing in the prime risk tier and lower average used rates.”
Getting a Car Loan
If you’re thinking about buying a used car and taking out an auto loan to do it, it’s a good idea to review your credit first. Having a good credit score can help you qualify for better terms and conditions on your financing. (To find out where your credit stands, you can see two of your credit scores for free, updated each month, on Credit.com.) And when you’re figuring out how much you can afford, remember to consider not only how much your monthly car payment will be but also how much the loan will cost you in the end, by considering the interest rate and length of the loan term. (The longer the loan term, the more interest you will pay.)
If you aren’t happy with what you see, don’t worry — you may be able to improve your credit scores by paying down any big credit card balances, disputing errors and limiting credit inquiries until your score has had time to rebound.
[Offer: Denied from a loan? It may be because of a low credit score due to errors on your report. Lexington Law can help you navigate the credit repair process so you can get back on track. Learn more about them here or call them at (844) 346-3296 for a free consultation.]
More on Auto Loans:
- Are There Car Loans for People With Bad Credit?
- What to Do If You Can’t Make Your Car Payments
- Top 5 Worst Car Buying Mistakes