AutoNation CEO Mike Jackson: Trucks Sales Surging

While car sales data for February showed slower growth, it appears that the auto loan market, at least at the end of 2014 is surging. According to Experian Auto, more than a quarter of all new loan originations were termed between 73 to 84 months. To add to that statistic, between 12 and 14 percent of new loan originations are termed at over 84 months. Melinda Zabritski, Director of Automotive Credit for Experian Automotive, is unsure of the new trend.

Zabritiski said in a statement, “I haven’t quite made up my mind on 84 month loans. Typically, the credit quality tends to drop the longer the loan terms. It has me concerned.”

Mike Jackson, CEO of AutoNation spoke to CNBC today and says leasing might be a better way to lower payments. Jackson said, “If you’re looking to get a lower payment, you’d be better off to lease rather than sign up for a seven year loan because then you have the option to do something else in three or four or five years and the finance company has taken the risk on the residual.” According to Experian, leasing is up 3.6 percent year over year as it represented nearly 30 percent of all new vehicles financed during the 4th quarter of 2014

Those longer-term loans are often an attempt at lowering the monthly cost of vehicle operation, however, is it working?

In the forth quarter of 2014 consumers spent an average of $482 per month on their new car payment, according to Experian. The average repayment total is up nearly a thousand dollars since 2013 to $28,381. This could be in part due to the cost of new light trucks and SUVs. According to Zabritsky, “The type of vehicle people are buying has shifted. We’re seeing more trucks and SUVs being bought and those models tend to cost more. Also speaking about the truck segment, Jackson feels that trucks are simply surging right now. Speaking about this truck trend Jackson said, “Look at the entire industry, the entire increase for the month of February was all in trucks plus 12 percent … and quite frankly the trend towards trucks until we get back to $3.50 a gallon, I don’t see it mitigating at all so it’s trucks, trucks, trucks.”