The average amount of negative equity customers bring to vehicle transactions dropped at Lithia Motors Inc. during the pandemic, largely because of stimulus checks and stronger used-vehicle values.
Before the pandemic, the average down payment on a Lithia vehicle was $1,800, CEO Bryan DeBoer said during an investor presentation last week. Today, the average down payment has risen 39 percent to $2,500.
The average negative equity rolled into a new-vehicle purchase at Lithia dropped to just more than $4,000, down from $5,000.
Stronger trades and stimulus checks "have put more money into the pockets of consumers and allowed them to have a little more savings to be able to apply for a little bit lower loan to value, which allows them to get better interest rates," DeBoer said.
After reaching record highs in May 2020, negative equity levels on new-vehicle sales have dropped during the coronavirus outbreak. Higher used-car values are benefiting vehicle trades, experts say, and depressing negative equity on vehicles coming back to the market.
DeBoer also credited Lithia's 900 F&I experts for helping customers structure deals best suited to their financial needs. Lithia has emphasized that leveraging the dealership group's finance professionals is essential to the company's long-term plans for growth in its digital and physical sales channels.
"We all know that financeability is the secret sauce of the industry, as well as inventory procurement," DeBoer said.