Tag: State of the Automotive Finance Market report

If there is one word to describe the automotive finance market in Q4 2019, it’s stable. By nearly every measure, the automotive finance market continued to move along at a good pace.

The average new vehicle loan hit $32,119 in Q2 2019. Average used vehicle loan amounts reached $20,156 in Q2 2019.

There’s recently been a significant amount of discussion about the stability of the automotive finance industry. Many fear the increase in the volume of delinquent U.S. automotive loans may be an early stage harbinger of the downfall of the automotive industry. But, the fact is, that’s not entirely true. While we certainly want to keep a close eye on the volume of delinquent loans, it’s important to put these trends into context. We’ve seen a steady increase in the volume of outstanding loan balances for the past several years – though the growth has slowed the past few quarters. And while much of the increase is driven by higher loan amounts, it also means there’s been an overall higher volume of vehicle buyers leaning on automotive lenders to finance vehicles. In fact, findings from our Q4 2018 State of the Automotive Finance Market Report show 85.1 percent of all new vehicle purchases were financed in Q4 2018 – compare that to 81.4 percent in Q4 2010 and 78.2 percent in Q4 2006. Suffice it to say, more financed vehicles will undoubtedly lead to more delinquent loans. But that also means, there is a high volume of car buyers who continue to pay their automotive loans in a timely manner. Through Q4 2018, there were nearly 86 million automotive loans and leases that were in good standing. With a higher volume of automotive loans than in the past, we should pay close attention to the percentage of delinquent loans compared to the overall market and compare that to previous years. And when we examine findings from our report, the percentage of automotive loans and leases that were 30-days past due dropped from 2.36 percent to 2.32 percent compared to a year ago. When we look at loans and leases that were 60-days past due, the percentages are relatively stable (up slightly from 0.76 percent to 0.78 percent compared to a year ago). It’s worth noting, these percentages are well below the high-water mark set during Q4 2009 when 3.30 percent of loans were 30-days delinquent and 0.94 percent of loans were 60-days delinquent. But, while the rate of delinquency is down and/or relatively stable year-over-year, it has trended upward since Q4 2015 – we’ll want to stay close to these trends. That said, much of the increase in the percentage of 60-day delinquent automotive loans is a result of a higher percentage of deep subprime loans from previous years – high-risk originations that become delinquent often occur more than 16 months after the origination. Additionally, the percentage of deep subprime originations has steadily decreased over the past two years, which could lead to a positive impact on the percentage of delinquent automotive loans. Despite rising automotive loan amounts and monthly payments, the data shows consumers appear to be making their payments on-time – an encouraging sign for automotive lenders. That said, lenders will want to continue to keep a close eye on all facets of car buyers’ payment performance moving forward – but it is important to put it into context. A clear understanding of these trends will better position lenders to make the right decisions when analyzing risk and provide consumers with comprehensive automotive financing options. To learn more about the State of the Automotive Finance Market report, or to watch the webinar, click here.    

Financing my first car was a bittersweet feeling. I was thrilled at the thought of purchasing a new vehicle, yet I was dreading haggling the price with the dealer. As a millennial, I feared the rising prices for new cars, and knew that I needed to find a way to make the vehicle more affordable. That said, I decided to look at used cars. Clearly, I’m not the only car shopper going through this experience. Many consumers are exploring new options to keep their monthly payments down, whether it’s extending the length of their loan, or turning to leases. Sometimes it’s both. According to Experian Automotive’s Q2 2015 State of the Automotive Finance Market report, the average loan amount for a new vehicle reached $28,524, while the average loan amount for a used vehicle hit $18,671, a second quarter high and an all-time high, respectively. Subsequently, the increasing loan amounts also caused the average monthly payment for new ($483) and used ($361) vehicles to increase. Interestingly, the $122 difference in average monthly payment was also a second quarter high, furthering the need to make car payments affordable. As such, consumers continued to take out leases. During the second quarter, leasing accounted for 26.9 percent of all new vehicle transactions, reaching an all-time high. While leasing continues to be a popular option among car shoppers to keep monthly payments down, we’re beginning to see these consumers take it a step further. Sure 36-month term leases are still the most popular, however the percentage of leases extending past the 36 months into the 37- to 48-month range has increased by 18 percent. Furthermore, the average lease payment dropped $13 from a year ago, reaching $394. Findings from the report also showed that consumers continued to lengthen their loan terms, especially for used vehicles. The percentage of used vehicles financed for 73- to 84-months increased by 14.8 percent from Q2 2014 to reach 16.1 percent – the highest percentage of record. New vehicles financed for the same term length climbed 19.7 percent from the previous year to reach 28.8 percent. If the trend continues, we can only expect vehicles to become more expensive and harder to keep within budget. That said there are ways to keep monthly payments within reason. Just as I did, consumers will need to explore the different options available and work with the financing tool that best meets their needs. If they can do that, it will just be the sweet feeling of purchasing a car.