I'm getting to my point, I promise.

There was a natural talent "ah-ha" moment for me in sixth grade. No, not the "Take On Me" type of Ah-ha moment.

In sixth grade, our little school in Arkansas had the idea of introducing electives into the curriculum. Kids could select courses like auto mechanics, cooking, art or music composition. I selected auto mechanics because I felt like I was absolutely stupid about cars or anything that needed oil. I was what you call an "indoor kid."

Short version: I hated the class. I was not interested. I retained nothing.

But, that was my "ah-ha" moment: I don't understand this, so leave car things to the professionals.

And you know what? I have lived that mantra to its fullest.

Since the dawn of me being able to afford a car, I have leased all of my vehicles because I don't want to deal with car problems. It's worked out great!

Sure, each time a lease is up I toy with the idea of buying out the car. I do some simple math and act like an adult, and then I toss it all away and lease another vehicle.

Two weeks ago my latest three-year lease was up, and it was time to hop into a new car and smell that joyous smell.

This time around of switching vehicles was very different than in years past: Inventory is very low, interest rates are wildly high (if you're buying a car) and dealerships seem to be in a panic.

For example, my brother recently looked at buying a new truck out in Colorado, but walked away from the best rate he could get at any credit union, bank or even through the manufacturer's financing. The best any of those organizations could do was a 6.5% interest rate. And there was also the fact that it would take months and possibly a year to get the truck.

The car I ended up leasing had to be ordered more than five months ago.

Typically, leased automobiles make up about 30% of all car sales in the U.S. In 2022, that number fell to 19%. As you all remember, the new and used auto market was bonkers during the pandemic, as inventory was extremely low and prices went way up. With COVID-relief money, people had the cash to spend on those higher-priced vehicles. Those days are gone.

Used vehicle prices have dropped a bit, but new vehicle prices are climbing.

As the senior economist at Cox Automotive, Charlie Chesbrough, said recently, "Affordability is going to be a growing issue."

Yeah, Charlie, it is an issue.

For instance, a year ago when I first started thinking about what car I'd lease next, the price was around $30,000. Today, the price is $44,000. When a normal car starts being that expensive, you start thinking about how your parents bought their first home for $28,000 in 1967.

Sitting down with the head of finance at the VW dealership to sign all of the digital paperwork two weeks ago, I had a lengthy chat with him about the leasing and buying trends he's seeing in 2023.

He's watching three things happen this year:

1. High interest rates are pushing new people into leases.
2. Inventory isn't coming back to pre-pandemic levels.
3. People are running out of money and trading in pandemic-purchased vehicles to get into a lease.

Leasing seems to be a popular way to go right now as new vehicle sales remain down. So where are we headed in this topsy-turvy auto market?

Cox Automotive expects leasing numbers to climb for the rest of this year, but not to the pre-pandemic level of 30%. The big "but" here is that the average price of a new car is approaching $50,000 and leasing appears to be the key to the ability to afford a new car, if you have good credit. So those leasing numbers could, in fact, blow past the 30% market share and climb much higher for the next few years.

In an interview, Chesbrough added, "There may be a little bit more pressure to be a little bit more aggressive [with leasing] for the Detroit 3."

Yeah, Charlie, there's pressure.

How are credit unions handling this pressure? According to Experian's quarterly "State of the Automotive Finance Market" report, credit union market shares slipped for both new and used cars from the fourth to the first quarter, but the drop was greatest in the new car market.

Credit unions' share of new car loans and leases was 16.5% in the first quarter, compared with 20.3% in the previous quarter and a high of 23.7% in 2022's third quarter.

Inside the Experian report was an interesting twist that revealed itself for all of the players in the auto lending market in March 2023. Leasing fell to 18.2% of new vehicles financed, down from 21.7% a year earlier and 27.9% two years earlier. However, leasing of used vehicles is rising: 11.2% of vehicles financed in the first quarter, up from 10.0% a year earlier and 9.7% two years earlier.

Leasing used vehicles appears to be gaining steam and interest. All of this makes sense as we are in an auto affordability crisis for a majority of people in this country. The average monthly payment for a new car was $725 in the first quarter of 2023, compared with $516 for a used car monthly payment. That $2,400 annual difference in payments is substantial and creates a difficult decision for many families that need transportation to get to work and get kids to school.

The economic barriers for living, working and simply existing are growing too high too fast as inflation and salaries are way out of step with one another.

I don't know what the solutions are except that people need good guidance and a comforting relationship with their credit union right now.

My relationship with my credit union(s) vary depending on the economy and my life. I'm lucky in that I can call my credit union CEO if needed and ask questions about what the credit union can do for me. For the past year, one credit union has been a place for me to earn a high savings rate, while staying out of the high interest rate payments environment. My other credit union gives me a nice rate for my checking account. Call it one of my natural talents: Knowing when to move money in and out of different accounts for different short- and long-term needs.

But witnessing the state of the auto dealership up close this year opened up my eyes to the financial struggles happening at the dealership level to the consumer level. Not a lot of people are doing great in that space right now. I hope credit unions can look inside and use their natural abilities to find a way to help.

Of note, during my VW finance guy discussion, we talked about credit unions and how they are or aren't helping in his current auto selling/leasing environment. His overall takeaway was that credit unions can't offer anything that's much different from what banks or VW financing deals can right now.

Upside: I think I convinced him to join Alliant Credit Union.

Downside: I don't know how to open the hood of my car.

Michael Ogden

Michael Ogden is editor-in-chief for CU Times. He can be reached at [email protected].