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Automotive Industry Demonstrates Resilience in Q3 2020

Published: December 14, 2020 by Melinda Zabritski

Black man sitting in car dealer showroom on the phone

The automotive industry has been through it’s fair share of challenges over the years. COVID-19 may have taken the industry by surprise, but as with the other downturns we’ve seen, it’s showing strong signs of rebounding. Particularly in the third quarter of 2020, there have been a number of positive trends.

Things aren’t quite back to normal, as loan volume was still down in Q3 2020. However, there was growth in overall loan balances, which grew 2.8%, bringing outstanding loan balances to $1.2 trillion. Despite volume decreases, overall, the industry continued to move forward at a steady pace. Here are some of the notable findings from Q3 2020.

Subprime originations reach record lows

Subprime originations comprised only 17.53% of originations in Q3 2020, which is a historic low. While it may be tempting to point to COVID-19 as the singular reason, it’s likely driven by a combination of factors. COVID-19 has noticeably impacted subprime originations, but these decreases have been ongoing for some time. In Q3 2015, total subprime made up 22.9% of originations and has steadily decreased since then. Additionally, since 2015, we’ve seen steady increases in overall credit quality, so there are fewer consumers who fall into the subprime category.

Longer-term loans help offset average payments

The average new vehicle loan amount in Q3 2020 was $34,635, which was more than a $2,000 increase year-over-year. Average used vehicle loan amounts also increased, but at a more modest rate of $945, bringing the average to $21,438 in Q3 2020. With large increases in average loan amounts, there’s often an assumption that average payments will follow suit, but that wasn’t the case: the average new vehicle monthly payment only saw an $11 increase year-over-year to $563, while average used vehicle payments increased $6 to $397.

Why didn’t we see larger spikes in average payments? There are two main factors: lower interest rates, and longer loan terms. Average interest rates for new vehicle loans dropped from 5.38% in Q3 2019 to 4.22% in Q3 2020, and from 9.09% to 8.43% for used vehicle loans in the same time period. Average loan terms extended slightly to 69.68 months for new vehicles and 65.15 months for used. Both have an impact on payment amount, as the longer you stretch out the loan, when combined with lower interest rates, can help keep monthly payments manageable.

The trends outlined here are just a snapshot of the automotive industry in Q3 2020, but it paints a positive picture. Data will continue to play a critical role in the country’s continued economic recovery, as it empowers lenders and dealers to make more informed decisions and ensure they have the right options available for consumers.

To view the full Q3 2020 State of the Automotive Finance Market report, click here.

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Amid interest rates leveling out and some lenders reassessing go-to-market strategies, the automotive finance landscape is experiencing notable shifts in market share. According to Experian’s State of the Automotive Finance Market Report: Q1 2025, banks recouped some of their total finance market share for the first time in several years, reaching 26.6% during the quarter, up from 24.8% a year ago. On the other hand, captives’ total market share declined from 31.3% to 29.8% year-over-year and credit unions experienced a modest increase from 20.2% to 20.6%. Despite the overall market share shifts, captives continue to lead in new vehicle financing at 57.1% in Q1 2025, although down from 62.1% the year prior. Meanwhile, banks increased to 24.1% this quarter, from 20.4% in Q1 2024 and credit unions went from 9.6% to 10.9% during the same period. On the used side, banks and credit unions were grouped much closer together. Banks led the way with 28.4% of the used finance market in Q1 2025, up from 27.9% last year, while credit unions went from 27.7% to 28.2% year-over-year and captives declined from 8.5% to 7.4%. As market share movement continues to be a valuable indicator of shifting strategies and consumer behavior, it’s important for automotive professionals to keep a close eye on these shifts to uncover new opportunities while looking for ways to stay ahead of the rapidly evolving industry. Breaking down the latest finance trends Data in the first quarter of 2025 shows the automotive finance market continues to stabilize as automotive professionals gain clearer visibility into lender behavior and consumer demand. For example, the average loan amount for a new vehicle increased $1,110 year-over-year to $41,720 in Q1 2025. However, the average interest rate dropped from 6.9% to 6.7%, and the average monthly payment went from $737 last year to $745 this quarter. For used vehicles, the average loan amount saw a slight uptick of $90 year-over-year, reaching $26,144 this quarter. Meanwhile, the average interest rate declined from 12.4% last year to 11.9% this quarter and the average monthly payment trended lower at $521, from $524 in Q1 2024. Monitoring and leveraging market share shifts and financing trends can support strategic planning while empowering automotive professionals to anticipate consumer purchasing patterns and tailor conversations more effectively to meet buyers where they are during their car buying journey. To learn more about automotive finance trends, view the full State of the Automotive Finance Market: Q1 2025 presentation on demand.

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