The new and used vehicle market has changed dramatically in the last few months.
If you are not aware the interest rates on vehicles has increased dramatically this year. Several of our customers just in the last 30 days are reporting that the interest rates they are seeing on new trucks are 10-11% or higher, and on used trucks some of our customers are reporting rates over 14%. These are clients with strong credit profiles and have been in business for years. The recently released Fed minutes show the Fed is considering another .5% interest rate hike in September which could impact vehicle rates further.
This is a great time to re-evaluate your business growth strategy. With new car dealers asking over MSRP it might make sense to delay the purchase of a new vehicle. We expect buyers to be able to negotiate better deals on new vehicles later this year because:
- Car dealers will have additional inventory as automaker’s catch up on production. The micro-chip shortage and pandemic impact that has delayed manufacturers is improving.
- The used car market should increase inventory as well. Many buyers over-extended themselves by paying significantly more than the MSRP. As consumer defaults increase you will have more opportunity to purchase a pre-owned late model vehicle with low mileage.
On the used market for trucks older than 2018, we have actually taken on more volume as our clients are re-evaluating the advantages a lease has compared to a bank loan for a few reasons:
- Our portfolios have gotten more competitive on truck leases than what the banks currently seem to be offering.
- Many bank vehicle loans show up on personal credit as installment debt. An increase on your personal debt ratios can have an adverse affect on your personal finances when trying to secure a mortgage or purchase equipment whereas a properly structured truck/equipment lease will not appear on personal credit.
If you are planning a purchase of either a new or used vehicle in the next 6 months make sure you check your credit profile first so you can correct any balances and/or accounts that may be dragging your score lower and jeopardize your ability to qualify for the best lease terms.