Low APR Incentives Effectively Offset COVID’s Impact
OEMs' aggressive incentives to offset the negative impacts of COVID-19 started soon after the pandemic spread nationally in mid-March. The focus on low or 0% APR programs moved the US market towards loans and away from leases. Of the households with a leased vehicle in the garage that returned to market this past January/February, 75% leased again, but in the March-July time period only 67% re-leased, driving up the loan mix from 25% at the start of the year to 33% in the most recent five months. Similarly, among the households returning to market this past January/February with a purchased vehicle in the garage, 89% purchased again and this metric rose to 92% in the next five months.
These low APR programs have become so popular that industry-wide
metrics have changed. The average interest rate on a 60+ month loan
for a mainstream 2019 or 2020 model year vehicle purchased in the
four months from April through July of this year was 4.1%, down
from 5.8% during the same time period in 2019. Further, the length
of these loans increased significantly, rising from an average of
69 months last year to 72 months this year.
Brand teams and their captives during the pandemic have taken advantage of the low cost of money to offer enticing rates and payments that have helped to mitigate the impact of COVID-19.
- Automotive Insights – Canadian EV Information and Analysis Q1 2022
- May 2022 production forecast sees variations from region to region
- The Shift to Utility: Part I – May 2022
- A Tale of Three Industries: A review of registration and migration patterns in the US new vehicle industry
- Fuel For Thought - Pace of Change: Energy and mobility, climate and innovation
- Global Auto Production Forecast Downgraded Further for 2022
- How autonomous trucks will transform landscape of logistics industry
- China sets green hydrogen production target in national development plan
The global auto industry continues to navigate a challenging supply chain environment as well as lingering COVID-19… https://t.co/Z5fAb0yo7i