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Auto loan market shifting to used cars
LOS ANGELES (9/25/08)--A sharp drop-off in new-car leasing programs may cause consumers to select a used car instead of a new car, and postpone their auto purchase for the present or purchase a less expensive car, according to a nationwide survey of 1,000 consumers. This will have an impact on credit unions, which traditionally rely on auto loans for a good part of their business. The survey by market researcher Synovate of Chicago for Global Debt Automotive, asked consumers: “The auto leasing business has experienced a shake-out of late: What do you plan to do if leasing becomes less available to you?” (BusinessWire Sept. 23). Thirty-seven percent of respondents said the recent sharp decline in new-car leasing programs would cause them to change their behavior:
* 19% of respondents would select a used car instead; * 11% would postpone their auto purchase for the time being; and * 7% would purchase a less expensive car.
Almost 40% of respondents said they were uncertain how the shake-out in auto leasing might affect their auto purchase plans. “The survey confirms what we’ve been hearing in the marketplace: that American consumers are uncertain how they will finance their next automobile and this uncertainty is causing them to consider a variety of options, including buying a less expensive new car, a used car, or postponing a purchase until conditions are more favorable,” said Michael Sheridan, founder and president of GDNAuto. He said the results are “bad news for car manufacturers and lenders who have discontinued popular leasing programs, and for the new car dealers who have relied on these programs to boost sales.” However, “there is a tremendous opportunity for used-car dealers and lenders to grow their business by introducing financing options that will have broad appeal to low- and moderate-income consumers being driven in growing numbers to used-car lots,” he added. Among the survey’s other key findings:
* Almost 20% of those 65 and older expect to postpone an auto purchase. At the opposite end of the age scale, consumers ages 18-24 are the least likely (11%) to buy the same new car they otherwise would have leased, and 14% of that age group say they probably will purchase a less expensive new car. * When it comes to buying vs. leasing the same car, household income is correlated with consumer expectations. Those with yearly incomes of less than $25,000 ruled out the purchase option (2.2 %), while that prospect grows as income rises. * Fully 47% of respondents from the South say they are uncertain about the best course of action, which may be why only 15% said they would be likely to purchase rather than lease a new car. Those in the Midwest are most likely to purchase rather than lease (27%), while Southerners are least likely to do so (15%). Those in the West are least likely to go the used-car route (14%) and most likely to forego the transaction entirely (15%). * Consumers employed full-time are most likely to purchase rather than lease the same car (25%)--but the self-employed are least likely to do so (14.5%). * The greater the level of education, the greater the likelihood that a consumer will purchase a new car when leasing isn’t an option.
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