— Although lending institutions have loosened up
credit standards in recent years for car leases and
purchases, the number of people being turned down for
automobile leases due to poor credit has been growing
since the beginning of the year and hit its highest
point in August, according to a company that tracks that
credit approval rate of 57.7 percent for car leases in
the month of August was the lowest rate seen in 2016 and
the lowest for the month of August in the past two
years, reported Swapalease.com, a Cincinnati-based
company that matches people who want out of their
existing contract with shoppers looking to take over a
short-term lease. By comparison, the approval rate for
August 2015 reached 85.7 percent.
car sales and demand for leases have been strong in
recent years, and even the recent slip in credit
approvals may not be a setback. Industry players say
that may reflect the rising number of overall
applications, which is considered a sign of an improving
has become more popular," said Scot Hall, executive
vice president of Swapalease.com. "But lease
transfer credit approval is maybe a half-step more
difficult than a typical lease because banks want to
manage their portfolio risk and they will often compare
the credit of the original borrower to the prospective
could decline a prospective borrower for a lease
transfer simply because his or her credit is not as good
as the current borrower’s, Hall said.
Faucher, deputy chief economist at Pittsburgh-based PNC
Bank said more people are applying for credit to lease
and purchase cars because the economy is on the rise and
consumers feel comfortable enough to get into the market
for a car.
of new and used cars and light trucks are headed for a
new all-time record this year, with 17.3 million sales
already registered since August, according to AutoData,
a company that supplies technical information to the
automobile aftermarket, based in the United Kingdom.
2015, 17.5 million cars and light trucks rolled off car
lots, the highest number since AutoData began tracking
sales data in 1993.
at PNC said the Federal Reserve periodically interviews
bank credit officers and releases a report called the
Senior Credit Officer Opinion Survey. The most recent
report shows demand for car loans has increased every
quarter since 2011.
we’ve also seen is lending institutions have relaxed
their lending standards, generally," Faucher said.
going on is we have more people looking to get a car
loan or a lease. But bank standards haven’t fallen as
dramatically (as the demand for credit is rising), which
is why some people are having difficulty getting a lease
even though standards are relaxed from the recession
looks good in terms of car sales, overall," he
said. "We are adding jobs, wages are rising,
consumers got a big benefit from lower gas prices and
interest rates are low."
financial planner said he typically advises clients to
buy rather than lease new cars.
longer you own your car, the more you’ll save buying
versus leasing," said David Walters, with Palisades
Hudson Financial Group in Portland, Ore. Also it costs
less to own an older car, which depreciates more slowly
than a late-model car.
your lease is up in two to four years, you’ll need to
lease or buy another car," Walters said. "And
most people who lease prefer new cars. If you had
bought, you’d be closer to the end of your car
payments, instead of starting over."
rates are usually higher on leases than car loans.
According to WalletHub’s recent survey of car
manufacturers’ financing arms, auto dealers charge
1.45 percent on average 36-month car loans versus 4.58
percent APR for leases.
of Swapalease said 31 of every 100 new car sales last
year was a lease, which is a record high. He said
consumers are drawn to car leases because of the low
expense involved in driving newer cars.
aren’t getting any cheaper every year and leasing
makes cars more affordable," Hall said.
"Ownership seems to be less important to many
people. They are looking primarily at their monthly
payment. In many cases, you’ll get a nicer vehicle for
less monthly payment than buying, and you can switch new
cars more often."
for the most popular vehicles for leasing, Hall said
luxury brands such as BMWs, Mercedes and Audis are
leased at a much higher rate than middle-market vehicles
like Chevrolets, Fords or Chryslers.