Over the last two years, the number of parents asking their children to co-sign on a car lease has increased significantly, according to a new study.
The study, conducted by LeaseTrader.com, found that the number of parents needing a child to co-sign on a lease for them has increased 28.9 percent since 2008.
While this trend may seem counterintuitive (historically, children turn to their parents for financial help as opposed to the other way around), areas that typically have a high number of leases - like Florida and southern California - have seen the number of middle-aged parents seeking help from their kids to repair their credit increase at the greatest rate. Such areas are harried by higher-than-average foreclosure and unemployment rates as well, which have a negative impact on the credit ratings of many consumers and could be leading to this trend.
"Each day people find a way to cope with the effects of the housing situation and recession that damaged their credit status," said Sergio Stiberman, CEO and founder of LeaseTrader.com. "People can afford to take over the lease payment but have issues qualifying for credit. Credit is still the most important aspect when getting a car lease, so many of these customers have been turning to their children for help."
This also underscores the quickly-expanding rate of auto leases in Florida given the current economy. A report in the Orlando Sentinel last week stated that car dealerships in the area have seen the annual amount of leases nearly double in the past year, though leases still only make up about 15 percent of the business at some dealerships. This rise can also be attributed to the ever-growing price of purchasing a new car, which, given the economic climate in the area, can certainly be a factor in their search.
But leases, one dealer told the Sentinel, are largely a stigma-free way for manufacturers to move new cars off dealer lots (as opposed to offering rebates, which can turn off consumers), and it keeps customers coming back to the dealer every two or three years by necessity.
The LeaseTrader.com study found that most parents who have asked their children for financial help have lease payments of less than $399 per month, on average. The study also stated that these agreements have an average of roughly 18 months remaining on them.