DRIVERS are just realizing they could save hundreds on monthly car payments – it’s all in the way a vehicle is purchased.
Consumers began to consider an alternative way to obtain automobiles while avoiding turbocharged auto loan fees and their re-emerging practice.
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Car leasing is back this year as the popularity of electric vehicles continues to grow, Detroit Free Press reported.
The leasing option is a way for drivers to get an affordable monthly payment of around $200 or less.
The average monthly lease payment was $517 for a non-luxury vehicle, according to new data found by TransUnião.
In comparison, the average car loan payment would be $707 per month for a similar vehicle.
Car buyers especially benefit from car leasing when it comes to purchasing an EV.
Nearly half of all electric car sales involved leasing in the second quarter of 2024, according to the TransUnion study.
This represents an increase from about a third of electric car sales in the same period last year.
Only 20.9% of EVs sold were leased in the second quarter of 2022.
It’s a shocking increase until you consider that there was a gap in an important tax credit that was part of the Inflation Reduction Act of 2022.
It gives electric vehicle dealers a boost when it comes to promoting compelling rentals for new electric and plug-in hybrid cars.
“The application of the IRA tax credit is one of the main drivers, without a doubt,” explained TransUnion Senior Vice President and Auto and Mortgage Line Business Leader Satyan Merchant.
“It’s not a coincidence, it’s a great motivator.”
Auto leasing has “increased across the board in recent quarters,” Merchant said Detroit Free Press.
“But nowhere more so than in the EV market, where leasing has already surpassed financing as the preferred option among consumers,” he added.
The average new car loan rate for a five-year loan is just under 8%, according to Bank rate.
It increased by 7% in 2023 and was even lower at 4% in March 2022.
Expert car rental advice
Ray and Zach Shefska, the father-son duo that make up CarEdge, spoke with Sun Motors USA reporter Kristen Brown in an exclusive interview about their top tips before signing a new car lease.
Leasing a car may be a more viable option for some rather than financing with an auto loan.
Leasing a car for 24 to 36 months can be attractive to many because the monthly payments are typically lower than loan payments, although there are some restrictions, such as a mileage allowance.
At the end of the lease, people can purchase the vehicle at a reduced price or they can return it to the dealership and lease another car.
Before entering into a lease, Ray offered some important tips to consider, drawn from his 40 years of experience as a sales manager at various dealerships:
- Learn the interest part of the rent — or the “money factor” — to understand how much interest you’ll pay and how much that adds up to in total.
- Negotiate the sales price before discussing monthly payments – the cheaper the car’s sales price, the cheaper your payments will be.
- Accept the premise that you will always have to make a payment, so you can have a good car for a cheaper price or a smaller car for a higher price.
Read more here.
For drivers who terminated a car lease this year, 38% of them rented another vehicle, according to data from TransUnion.
Just under 30% financed a vehicle after the lease ended.
In June, new car buyers who took out a loan to finance their purchase paid an average rate of slightly more than 7% on their loans, according to Edmunds.
Merchant emphasized that car buyers are less sensitive to fees than many realize.
He explained that consumers are typically more focused on monthly payments.
Merchant believes that lower monthly payments on leases create an opportunity for dealers to work with customers as everyone involved benefits.
He explains that leasing in general primarily benefits manufacturers and dealers, but the lower payments will attract customers looking for good, reliable, cheaper cars.
By moving inventory, creating loyal customers who will return in just a few years after the lease ends, and consistently maintaining an inventory of gently used cars, dealerships can thrive with drivers choosing to lease over purchase, while time when they offer drivers a good deal.
Vehicle financing
There are 3 main types of car finance – personal car loans, hire purchase (HP) and personal contract hire (PCH).
One of the simplest ways to finance your new car is through a car loan.
It involves borrowing money to buy the engine.
You’ll need to work out how much you need from the lender – a bank or building society – and also how long you want to borrow the money for.
But with a personal car loan, you can drive as much as you want, and if the car has any damage to the interior, there’s no expectation of fixing it unless you want to.
Rent-Purchase is a useful option that allows you to spread the costs across monthly payments – until you finally own the car.
HP reimbursements can be a little higher than with other options because you make regular payments to eventually own the vehicle.
But on the other hand, it won’t penalize you if you don’t have a good credit history.
HP financing is guaranteed by the value of the vehicle, so if you are unable to meet the monthly installments, the finance company can return the car.
The third great option, with PCP financing, you will not own the vehicle during the contract – it will belong to the finance company.
You will be asked to make a deposit and pay regular installments over the agreed term.
If you decide it’s time to give up on your engine, you can simply return it or partially exchange it for something new.
This story originally appeared on The-sun.com read the full story
