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Consumer Expenditure Survey Anthology, 2003 61
The Cost and
Demographics of Vehicle
Acquisition
LAURA PASZKIEWICZ
Laura Paszkiewicz is an economist in the
Branch of Information Analysis, Division
of Consumer Expenditure Surveys, Bureau
of Labor Statistics.
T
ransportation costs make up a
large part of a consumer’s bud-
get. Consumer Expenditure (CE)
Survey data for 2000 indicate that 88
percent of all consumer units
1
either
owned or leased a vehicle,
2
and expen-
ditures for leasing and purchasing (the
latter defined as a net outlay) vehicles
made up almost 10 percent of the aver-
age consumer unit’s total expenditures.
In April 1991, the CE Survey began
to ask for detailed information on the
leasing of vehicles. Since that time, the
incidence of leasing a vehicle increased
steadily before tapering off in recent
years. With the introduction of the more
detailed data, it is possible to investi-
gate the factors that contribute to a
consumer’s decision to lease a vehicle,
as opposed to purchasing it. The main
factor contributing to this decision is
the varying cost of each option. Using
recent CE Survey data, this article ex-
amines the initial and monthly costs
involved in leasing a vehicle, purchas-
ing a new vehicle, and purchasing a
used vehicle. The article presents de-
tails on the demographic breakdown of
consumers who lease, buy new, or buy
used vehicles.
Methodology
The sample used for this article includes
all Interview survey participants from
1999 or 2000 who reported a new lease
3
or purchase of a vehicle in the year in
which the interview took place. (In
other words, the sample consists of all
participants in the 2000 Survey who
leased or purchased a vehicle in 2000,
as well as all participants in the 1999
Survey who leased or purchased a ve-
hicle in 1999.) Respondents who re-
ported using the vehicle for business,
or, alternatively, receiving complete or
partial payment for the vehicle by an
employer are excluded from the sample.
Costs involved in leasing versus buy-
ing are investigated. Average down-
payments and monthly payments are
compared, as are the average durations
over which payments are made. The
investigation further includes analyses
of leasing and buying by the follow-
ing demographic characteristics: Age,
race, gender, income quintile, geo-
graphical region, and type of area (ur-
ban vs. rural).
Background
The increase in the frequency of leas-
ing vehicles in recent years has been
captured in a new section of the CE
Survey added in April 1991. Leases
1
See the glossary at the end of this an-
thology for the definition of consumer unit.
2
In the published CE data, vehicles are
defined as cars, trucks (including minivans,
vans, sports utility vehicles (SUVs), and
jeeps), and other vehicles (motorcycles and
aircrafts). Henceforth, the term vehicle will
encompass only cars and trucks.
3
The time at which a lease is started is
determined by the year in which the first
payment was made on the lease.
62 Consumer Expenditure Survey Anthology, 2003
made up 2.7 percent of all new acquisi-
tions of vehicles
4
in 1991. By 1997, leas-
ing had reached 10.0 percent of all re-
cent car acquisitions. (See chart 1, top
panel.) After 1997, the incidence of leas-
ing began to decline, falling to 7.2 per-
cent of vehicle acquisitions in 2000.
With the increasing popularity of leas-
ing during 1991–97, new-vehicle pur-
chases decreased as an overall percent-
age of vehicle acquisitions, dropping
from 27 percent in 1991 to 21 percent in
1997. After 1997, the incidence of new-
vehicle purchases began to rise, reach-
ing 25.6 percent of vehicles acquired in
2000. Used-vehicle purchases made up
70.4 percent of all acquisitions of ve-
hicles in 1991. From 1991 to 1996, the
percentage rose to 72.7 percent, after
which it began to fall. In 2000, used-
vehicle purchases made up 67.2 per-
cent of all vehicle acquisitions.
In 1999 and 2000, the total percent-
age of consumer units acquiring a ve-
hicle was just under 4 percent of the
entire population. Of those who re-
ported a recent acquisition, 66 percent
bought a used vehicle, 26 percent
bought a new one, and the remaining 8
percent leased a vehicle. (See table 1.)
Costs
One of the factors involved in choos-
ing a method of acquisition is cost.
Among the costs incurred in acquiring
a vehicle are downpayments and month-
ly payments for leasing and purchas-
ing.
Overall, 81 percent of new-vehicle
purchasers financed their purchases,
compared with 56 percent of used-ve-
hicle purchasers. The CE Survey asks
questions regarding the amount of
downpayments and monthly payments
for purchased vehicles of those re-
spondents in the sample who financed
the vehicle and have monthly pay-
ments remaining. Of those purchasers
who financed, 87 percent of new-ve-
hicle purchasers and 79 percent of
used-vehicle purchasers had payments
remaining.
Downpayments are a good indica-
tor of upfront costs for acquiring a ve-
hicle—costs that could dictate whether
to lease a vehicle, buy a used vehicle,
or buy a new vehicle. Lessees paid
$868,
5
on average, as a downpayment,
about 76 percent of the amount that a
used-vehicle purchaser paid as a
downpayment ($1,147) and only 30 per-
cent of the amount that a new-vehicle
purchaser put for a downpayment
($2,914). (See table 2.) The maximum
downpayment was $8,500 for lessees,
$37,000 for new-vehicle purchasers,
and $19,000 for used-vehicle purchas-
ers. These data suggest that the initial
costs for leasing an automobile are
lower than the costs for purchasing ei-
ther a new or used vehicle. The differ-
ence in downpayments can be partially
explained by the main difference be-
tween leases and purchases: with leases,
the downpayment is for a service; with
purchases, the downpayment is for an
asset.
Monthly costs also could be a fac-
tor in deciding whether to lease, buy
new, or buy used. The average monthly
payment was $353 for lessees, $399 for
new-vehicle purchasers, and $273 for
used-vehicle purchasers. Thus, al-
though lessees have a lower monthly
payment than do new-vehicle purchas-
ers, they still have a higher monthly
payment than do used-vehicle pur-
chasers.
The amount of time it takes to pay
off a loan or to complete a lease also
could have an effect both on a person’s
decision to lease, buy new, or buy used
and on the total cost of the vehicle. On
average, new-vehicle buyers made 54
monthly payments, used-vehicle buy-
ers 43, and lessees 39. The most com-
mon term for leasing was 3 years, and
50 percent of lessees chose that term.
For new-vehicle purchasers, the most
common term for financing was 5 years,
and 55 percent of new-car purchasers
chose that term. For used-vehicle pur-
chasers, a number of terms were com-
mon, but the top two were 5-year terms
(chosen by 27 percent) and 4-year terms
(selected by 24 percent).
Demographic analysis
The demographic analysis in this sec-
tion examines the entire sample of those
acquiring a vehicle in 1999 or 2000, in-
cluding consumers who financed their
vehicles and those who did not. (See
table 1.)
Income. Consumers who purchased
used vehicles had the least income, on
average. The average annual income
(based on complete income reporters
6
)
of someone who bought a used vehicle
was $48,004, compared with $72,992 for
lessees and $69,875 for new-vehicle
purchasers. Overall, nearly 30 percent
of those who recently acquired a ve-
hicle were in the highest income
quintile; the 30-percent figure was more
than that for the first and second in-
come quintiles combined.
7
The percent-
age of used-vehicle purchases de-
creases and the percentages of both
new-vehicle purchases and leasings of
vehicles increases as one proceeds
from a lower income quintile to a higher
income quintile.
Among the consumer units that
bought or leased a vehicle, those in the
lowest income quintile were the most
likely to buy a used car (80.9 percent).
In comparison, only 54.1 percent of auto
purchasers in the fifth quintile bought
used vehicles. Almost 36 percent of
those leasing or buying in the highest
income quintile bought a new car; the
figure was 10 percentage points higher
than that of the fourth income quintile
and more than 20 percentage points
higher than that of the lowest income
quintile.
Age.
8
Twenty-eight percent of those
acquiring vehicles in 1999 and 2000
4
New acquisitions of vehicles include pur-
chases of new vehicles, purchases of used ve-
hicles, and leases of vehicles.
5
In computing these averages, those who
recently acquired a vehicle and reported no
downpayment were counted as having zero
dollars for a downpayment.
6
See “Glossary” in Appendix A at the end
of this anthology for the definition of com-
plete income reporter.
7
See “Glossary” in Appendix A at the end
of this anthology for the definition of
quintiles of income before taxes.
8
Both the age and race variables refer to
the age or race of the reference person—the
person first mentioned when the respondent
is asked, “Start with the name of the person
or one of the persons who owns or rents the
home.”
Consumer Expenditure Survey Anthology, 2003 63
were in the 35-to 44-year-old age
bracket, although that age group made
up just 22 percent of the population.
Both the 25- to 34-year-old age group
and the 45- to 54-year-old age group
also made up large portions of those
acquiring vehicles. Each of the two
groups accounted for more than 20
percent of all acquisitions, yet made up
less than 20 percent of the population.
The oldest group (75 and older) ac-
quired the fewest vehicles, with only
2.6 percent of acquisitions, much less
than their 9.6-percent share of the popu-
lation.
The average age was 44 for con-
sumers leasing vehicles, 47 for consum-
ers buying new vehicles, and 42 for
consumers buying used vehicles. As
these data imply, the probability of
choosing a used car over a new car de-
creases with age. The incidence of leas-
ing ranges from 7.9 percent to 8.6 per-
cent for those 25 to 64, peaking in the
age range from 55 to 64. Consumers
under the age of 25 or over the age of
75 who acquired a vehicle were the least
likely to lease, with 5.4 percent and 4.9
percent, respectively, doing so.
Gender. In order to examine the statis-
tics on vehicle acquisitions by gender,
the sample was divided into subsets
that include only single-member con-
sumer units. The CE Interview survey
collects expenditure data for all mem-
bers within the consumer unit com-
bined, not for each member separately.
By using single consumer units instead,
a differentiation can be made between
the expenditures of men and those of
women.
Men acquired a slightly larger per-
centage of vehicles than their share of
the single population in 1999–2000. The
figures were 58 percent and 54 percent,
respectively.
Results of this portion of the study
suggest that men and women acquire
vehicles differently. A total of 9.6 per-
cent of single men in the sample leased
vehicles, 20.6 percent bought new ve-
hicles, and 69.9 percent purchased used
vehicles. By contrast, 11.5 percent of
single women leased vehicles, 36.9 per-
cent bought new vehicles, and 51.5
percent bought used vehicles.
Even though single women acquired
a smaller percentage of vehicles than
their share of the population, they pur-
chased a greater percentage of new ve-
hicles and leased a greater percentage
of vehicles than their population share.
In particular, women made up 46 per-
cent of the singles population, yet pur-
chased 56.9 percent of all new vehicles,
and leased 46.9 percent of all leased
vehicles, among singles.
Region. Acquisitions of vehicles vary
by region. With 31 percent and 16 per-
cent, respectively, of total acquisitions,
consumer units in the South and the
Northeast acquired smaller percent-
ages of vehicles than their population
shares in 1999–2000: 35 percent and 19
percent of the total U.S. population. By
contrast, with 27 percent and 25 per-
cent, respectively, of vehicle acquisi-
tions, consumer units in the Midwest
and the West acquired higher percent-
ages of vehicles than their population
shares of 24 percent and 22 percent of
the total U.S. population.
Consumers acquiring vehicles in the
Northeast were more likely to lease
than were those in the West, at 12.6
percent, in contrast to 4.8 percent. Con-
sumer units in the West were more
likely to buy a used vehicle, with 66
percent of those acquiring vehicles
doing so, compared with 58 percent of
those in the Northeast. The Northeast
and the West both had about 30 per-
cent of their vehicle-acquiring popula-
tion reporting a purchase of a new ve-
hicle. The Midwest and the South
varied only slightly in the three kinds
of acquisitions: in the Midwest, 9 per-
cent of those who acquired vehicles
leased them, 23 percent bought them
new, and 69 percent purchased them
used; in the South, 8 percent leased
their vehicles, 25 percent purchased
them new, and 67 percent bought them
used.
Type of area (urban vs. rural). Con-
sumers in urban and rural areas each
acquired roughly the same percentage
of vehicles as their population share.
The methods of acquisition that con-
sumers in the two areas chose, how-
ever, were considerably different.
Consumer units in urban areas were
more likely to lease or buy a new ve-
hicle than were those in rural areas.
Among consumer units acquiring ve-
hicles, 3.3 percent of those living in ru-
ral areas leased their vehicles, whereas
8.5 percent of those living in urban ar-
eas did so. Almost 27 percent of con-
sumer units in urban areas bought new
vehicles, compared with 22.6 percent
of those in rural areas. Someone living
in a rural area was more likely to buy a
used car (71.4 percent) than was some-
one in an urban area (64.8 percent).
Race.
9
The CE Survey has four race
categories: White; black; Asian or Pa-
cific Islander; and American Indian,
Aleut, or Eskimo.
Persons of Asian or Pacific Islander
heritage accounted for just 3.1 percent
of the population acquiring vehicles
and were the most differentiated in
terms of the three ways of acquiring
them, compared with the other races. A
little more than half of their population
acquiring vehicles bought a used ve-
hicle, 42 percent purchased a new ve-
hicle, and the remaining 7 percent leased
a vehicle. Among the remaining racial
groups, the most similar in terms of
vehicle acquisition method was the
white population, which accounted for
most (88 percent) of the population
acquiring vehicles: among whites, 65.5
percent bought used vehicles, 26.5 per-
cent purchased new ones, and 8 per-
cent leased vehicles.
The black population and the Ameri-
can Indian, Aleut, and Eskimo popula-
tion were most different from the group
of Asian and Pacific Islander descent
in their distribution over the three kinds
of arrangements for acquiring a vehicle.
The two populations were similar to
each other in having the lowest per-
centage of leases and new-vehicle pur-
chases and the highest percentage of
9
Both the age and race variables refer to
the age or race of the reference person, the
person who was first mentioned when the
respondent is asked, “Start with the name of
the person or one of the persons who owns
or rents the home.”
64 Consumer Expenditure Survey Anthology, 2003
used-vehicle purchases. Among black
consumer units acquiring vehicles, 5.3
percent leased, 19.6 percent purchased
a new vehicle, and 75.2 percent bought
a used vehicle. Among American Indi-
ans, Aleuts, and Eskimos, 4.2 percent
leased a vehicle, 16.5 percent purchased
a new vehicle, and 79.4 percent pur-
chased a used one.
Conclusion
The 1999–2000 CE Survey data on ve-
hicle acquisition indicates that, over-
all, purchasing used vehicles is the
most common method of acquiring a
vehicle. This is because it is typically
less expensive to purchase a used ve-
hicle than it is to buy a new vehicle or
lease a vehicle. By contrast, cost is not
the predominant factor in choosing to
purchase a new vehicle over leasing
one. Even though leasing a vehicle is
financially less of a burden compared
with purchasing a new vehicle, the next
most common method of acquiring a
vehicle is purchasing new vehicles.
Leasing remains the least common
method.
The 1999–2000 data also suggest
that the choice of a vehicle acquisition
method varies by age, race, gender, in-
come level, region, and degree of ur-
banization. The largest differences oc-
cur with respect to income levels,
gender, and race.
In addition to demographic differ-
ences and various expenses involved
in the decision to lease a vehicle, pur-
chase a new vehicle, or purchase a
used vehicle, several other factors en-
ter into the decision as well. The avail-
ability of leases or new vehicles in dif-
ferent regions may affect the frequency
with which one can obtain a lease or
find a suitable vehicle to purchase.
Further, the desirability of owning an
asset may spur an individual to pur-
chase rather than lease. If, instead, the
vehicle’s intended use is most impor-
tant to a person, then leasing might be
preferred. Finally, the types of vehicles
available under a lease may impel a
consumer to lease rather than buy: if a
consumer can drive a luxury car by leas-
ing it for the same cost as purchasing
a standard car, he or she may prefer to
lease.
Consumer Expenditure Survey Anthology, 2003 65
Table 1. Percent of consumer units reporting vehicle acquisitions, by type of acquisition, selected consumer unit
characteristics, 1999–2000
All .........................................................................................
100.0
100.0
7.73
26.15
66.12
Income:
1
Quintile 1 .........................................................................
20.0
9.3
4.7
14.4
80.9
Quintile 2 .........................................................................
20.0
15.3
4.0
19.9
76.0
Quintile 3 .........................................................................
20.0
20.4
5.5
20.0
74.5
Quintile 4 .........................................................................
20.0
26.0
7.2
26.2
66.6
Quintile 5 .........................................................................
20.0
29.0
10.2
35.8
54.1
Region:
Northeast........................................................................
19.3
17.2
12.3
29.0
58.7
Midwest ..........................................................................
23.6
26.8
8.1
21.9
70.0
West ..............................................................................
34.9
34.2
4.7
28.5
66.8
South ..............................................................................
22.2
21.8
8.5
25.5
66.1
Degree of urbanization:
Urban ..............................................................................
87.6
85.6
8.5
26.8
64.8
Rural ..............................................................................
12.4
14.5
3.3
22.6
74.1
Race:
White ..............................................................................
83.8
87.4
8.0
26.5
65.5
Black ..............................................................................
12.1
8.9
5.3
19.6
75.2
American Indian, Aleut, Eskimo ......................................
1.0
1.1
4.2
16.4
79.4
Asian or Pacific Islander .................................................
3.1
2.7
7.4
42.3
50.3
Age:Under 25.........................................................................
7.5
7.2
5.4
16.9
77.7
25–34 ..............................................................................
17.6
21.5
7.9
22.5
69.6
35–44 ..............................................................................
22.3
27.5
8.1
22.4
69.4
45–54 ..............................................................................
19.6
23.4
8.2
26.1
65.7
55–64 ..............................................................................
12.7
11.4
8.6
37.1
54.3
65–74 ..............................................................................
10.7
6.4
5.8
39.1
55.1
75 and older ....................................................................
9.6
2.6
4.9
41.6
53.5
Gender:
Male ................................................................................
54.3
57.7
9.6
20.6
69.9
Female ............................................................................
45.7
42.4
11.5
36.9
51.5
1
Percentage represents the percent of complete reporters.
Among groups
Within groups
Percent of
general
population
Percent
of all
acquisitions
Leased
Bought new Bought used
Table 2. Costs and term of vehicle acquisitions, by type of acquisition, 1999–
2000
Leased ..............................................
$353
$ 868
39
Bought new
1
......................................
$399
$2,914
54
Bought used ......................................
$273
$1,147
43
1
The bought new and bought used categories represent vehicles that were financed
and still had payments remaining.
Average
monthly
payment
Average length
of term
(months)
Average
downpayment
66 Consumer Expenditure Survey Anthology, 2003
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
64
66
68
70
72
74
76
78
Percent of all acquisitions
64
66
68
70
72
74
76
78
Percent of all acquisitions
Purchase of used vehicle
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
20
22
24
26
28
30
Percent of all acquisitions
20
22
24
26
28
30
Percent of all acquisitions
Purchase of new vehicle
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
0
2
4
6
8
10
12
Percent of all acquisitions
0
2
4
6
8
10
12
Percent of all acquisitions
Lease of vehicle
Chart 1.
Trends in vehicle acquisition methods, 1991-2000
