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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.
