Fernando de Querol Cumbrera
Research expert covering construction, loans, leasing, savings, and debt
Car financing and leasing in the United States - statistics & facts
There are millions of car sales each year in the United States. While some consumers can purchase them outright, the majority of new vehicle transactions and a large share of used vehicle transactions are financed. For consumers, this enables them to smooth the cost of the purchase over several years. Meanwhile, the different types of automobile loan providers generate revenue from the interest rates and have the car as collateral. Those services can be provided by banks, credit unions, captive finance companies that are the subsidiary of vehicle manufacturers, or car rental companies where clients can lease a vehicle.
For many citizens in the U.S., public transportation does not service the areas in which they live and work, or cars are simply more convenient. As such, having a car gives them more options and a mobility they would otherwise not have.
Given the size of the automotive industry in the United States, the financial services industry plays an important role in the industry by facilitating the access to new or used cars, either through loans or leases. Nevertheless, car loans is by far still the most popular option.
For many citizens in the U.S., public transportation does not service the areas in which they live and work, or cars are simply more convenient. As such, having a car gives them more options and a mobility they would otherwise not have.
Why do consumers choose to lease a car?
Car sales in the United States dropped overall after a peak in the 1980s, and they have reached even lower levels in recent years. Although that is the way most drivers get hold of a car, for some people, owning a car may just present a host of maintenance problems and costs of depreciation. This has led to a passenger car leasing industry, which has a significant share of the market, even if it has also decreased in recent years. The consumer can rely on the dealer to perform routine upkeep such as oil changes, and after the term of the lease, ownership reverts to the dealer. Such arrangements account for a sizable share of new vehicles that enter the market in the United States.Car financing and leasing conditions for the consumer
The total automotive loan balances in the United States increased a lot throughout the past decade. Both financing and leasing are multi-year investments for the banks, credit unions, and dealerships that pay the up-front costs of the vehicle. As such, the borrower’s credit score influences the value of the loan, as well as the interest rate paid. In fact, during economic downturns, the car loans for borrowers in the lowest credit score level tend to decrease more than those that are considered to be less risky. Even for used cars, the average credit score needed matters and is steadily increasing year-on-year.Given the size of the automotive industry in the United States, the financial services industry plays an important role in the industry by facilitating the access to new or used cars, either through loans or leases. Nevertheless, car loans is by far still the most popular option.
