Vehicle Purchases, Leasing, and Replacement Demand

Ana Aizcorbe, Martha Starr, and James T. Hickman

Ana Aizcorbe is an economist at the Bureau of Economic Analysis (BEA) and a Visiting Fellow at the Brookings Institution. Prior to joining the research staff at BEA, she was a staff economist at the Federal Reserve Board (where she served as an auto industry analyst and, later, as a participant of the Survey of Consumer Finances Project), a research economist at the Bureau of Labor Statistics (where she conducted research on the competitiveness of the U.S. auto industry and on the productivity of auto assembly plants), and a consultant to General Motors.

Martha A. Starr is an assistant professor of economics at American University. From 1992 to 2002, she worked as a staff economist in the research division of the Federal Reserve Board of Governors. She received her bachelor’s degree from McGill University in Montreal and her doctorate in economics from Boston University.

James Hickman is a graduate student at Carnegie Mellon University, where he is studying quantitative economics. He has served as an intern at the Federal Reserve Board of Governors and at the Bureau of Economic Analysis. He also earned his bachelor’s degree in economics from Carnegie Mellon.

The motor vehicle industry has undergone important changes in recent years, including a shift in production from autos to light trucks and growth of vehicle leasing. This paper uses household-level data from the Federal Reserve’s Survey of Consumer Finances to document changes in households’ acquisitions and financing of motor vehicles from 1989 to 2001. We examine what types of vehicles households had, what financing arrangements were used to acquire them, and how vehicle holdings vary with such household characteristics as income, age, wealth, and creditworthiness. The data provide useful insights into the determinants of replacement demand and the use of alternative financing arrangements like leasing.

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