Tag: Experian

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Dealership Training Economy

Leasing On the Rise Again

Vehicle affordability continues to be the albatross weighing down vehicle sales in 2024. While a  joint forecast from J.D. Power and GlobalData reflects new vehicle sales rising 1.4 percent year-over-year to 1.21 million units, the average listing price in February was projected at $47,142. This amount is down one percent from early 2023. Regardless of this slight decline, when MSRP is combined with perniciously high interest rates, financing a new vehicle is still out of reach for a large part of the buying public.

But there is a trend worth noting that offers a glimmer of hope to the buyer who needs an affordable new vehicle – leasing! The Experian State of the Automotive Finance Market Q4 2023 reflects that the percentage of borrowers who choose to lease is up significantly. Leasing has always been popular with prime and super prime consumers. However, the auto industry saw a jump in subprime and near-prime leases as well.

Leasing Graphic from Experian
Source: Experian State of the Automotive Finance Market Q4 2023 Report
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Dealership Training Industry Trends Training

Consultative selling

The United Auto Workers strike at a few U.S. manufacturing plants has consumed the daily news cycle over the past few weeks. While new vehicle inventory has largely recovered from the pandemic-induced supply chain issues, dealer principals are closely watching how events unfold before adjusting year-end plans.

As dealers face an uncertain 4th quarter, consumers are also casting a sideways glance at their economic future. According to the Experian State of the Automotive Finance Market Q2 2023 report, auto loan delinquencies rose past pre-COVID levels and new vehicle values continued to climb while LTV decreased. While the Federal Reserve held interest rates steady this month – for the second time this year – rates remained at a range of 5.25 percent to 5.5 percent, the highest level since 2001. But auto lenders continue to take their pound of flesh as the average auto loan interest rates across all credit profiles ranged from 5.18 percent to 14.08 percent for new cars and 6.79 percent to 21.32 percent for used cars.

Americans owe $1.56 trillion in auto loan debt, according to the Federal Reserve Bank of New York, accounting for 9.2 percent of American consumer debt. The average payment for new vehicles was a record-high $742 in the second quarter of 2023, with loan terms up to 74 months, according to Experian. Think about paying $742 every month for the next five years on possibly two vehicles. A lot can happen during that time, including layoffs, unexpected repairs, theft, accidents, etc.

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Dealership Training

Is Your Team Made Up Of Order Takers or Sellers?

Dealerships and salespeople alike have reaped the benefits of healthy profit margins over the last few years. However, just as the margin pendulum swung deep into seller’s market territory, it’s beginning its backward trajectory into a buyer’s market.

While inflation and lack of inventory have kept vehicle prices high. Interest rates, climbing debt, and lack of affordable vehicles are pressuring more consumers out of the market. According to Experian, during the first quarter of 2023 the average APR for prime consumers fell between 6.40 percent for new vehicles and 8.75 percent for used vehicles. Think about that for a second. If a prime consumer can’t get a rate below 5 percent, what does that mean for nonprime and subprime consumers?

As of 2021, Experian reported that nearly one in three Americans had a subprime credit score. So approximately 33 percent of your customers don’t qualify for an 8.75 percent APR. Their range spans from 8.86 percent to 21.32 percent. On top of the APR issue is rising debt. Because consumers purchased both new and pre-owned vehicles priced well above historical norms for the last three years, those three-year-old consumers are returning to dealerships with significantly less of their auto loan paid off. According to Edmunds’ fourth quarter data from 2022:

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