Tag: used vehicle financing

With the National Automobile Dealers Association (NADA) Show set to kickoff later this week, it seemed fitting to explore how the shifting dynamics of the used vehicle market might impact dealers and buyers over the coming year. Shedding light on some of the registration and finance trends, as well as purchasing behaviors, can help dealers and manufacturers stay ahead of the curve. And just like that, the Special Report: Automotive Consumer Trends Report was born. As I was sifting through the data, one of the trends that stood out to me was the neck-and-neck race between Millennials and Gen X for supremacy in the used vehicle market. Five years ago, in 2019, Millennials were responsible for 33.3% of used retail registrations, followed by Gen X (29.5%) and Baby Boomers (26.8%). Since then, Baby Boomers have gradually fallen off, and Gen X continues to close the already minuscule gap. Through October 2024, Millennials accounted for 31.6%, while Gen X accounted for 30.4%. But trends can turn on a dime if the last year offers any indication. Over the last rolling 12 months (October 2023-October 2024), Gen X (31.4%) accounted for the majority of used vehicle registrations compared to Millennials (30.9%). Of course, the data is still close, and what 2025 holds is anyone’s guess, but understanding even the smallest changes in market share and consumer purchasing behaviors can help dealers and manufacturers adapt and navigate the road ahead. Although there are similarities between Millennials and Gen X, there are drastic differences, including motivations and preferences. Dealers and manufacturers should engage them on a generational level. What are they buying? Some of the data might not come as a surprise but it’s a good reminder that consumers are in different phases of life, meaning priorities change. Over the last rolling 12 months, Millennials over-indexed on used vans, accounting for more than one-third of registrations. Meanwhile, Gen X over-indexed on used trucks, making up nearly one-third of registrations, and Gen Z over-indexed on cars (accounting for 17.1% of used car registrations compared to 14.6% of overall used vehicle registrations). This isn’t surprising. Many Millennials have young families and may need extra space and functionality, while Gen Xers might prefer the versatility of the pickup truck—the ability to use it for work and personal use. On the other hand, Gen Zers are still early in their careers and gravitate towards the affordability and efficiency of smaller cars. Interestingly, although used electric vehicles only make up a small portion of used retail registrations (less than 1%), Millennials made up nearly 40% over the last rolling 12 months, followed by Gen X (32.2%) and Baby Boomers (15.8%). The market at a bird’s eye view Pulling back a bit on the used vehicle landscape, over the last rolling 12 months, CUVs/SUVs (38.9%) and cars (36.6%) accounted for the majority of used retail registrations. And nearly nine-in-ten used registrations were non-luxury vehicles. What’s more, ICE vehicles made up 88.5% of used retail registrations over the same period, while alternative-fuel vehicles (not including BEVs) made up 10.7% and electric vehicles made up 0.8%. At the finance level, we’re seeing the market shift ever so slightly. Since the beginning of the pandemic, one of the constant narratives in the industry has been the rising cost of owning a vehicle, both new and used. And while the average loan amount for a used non-luxury vehicle has gone up over the past five years, we’re seeing a gradual decline since 2022. In 2019, the average loan amount was $22,636 and spiked $29,983 in 2022. In 2024, the average loan amount reached $28,895. Much of the decline in average loan amounts can be attributed to the resurgence of new vehicle inventory, which has resulted in lower used values. With new leasing climbing over the past several quarters, we may see more late-model used inventory hit the market in the next few years, which will most certainly impact used financing. The used market moving forward Relying on historical data and trends can help dealers and manufacturers prepare and navigate the road ahead. Used vehicles will always fit the need for shoppers looking for their next vehicle; understanding some market trends will help ensure dealers and manufacturers can be at the forefront of helping those shoppers. For more information on the Special Report: Automotive Consumer Trends Report, visit Experian booth #627 at the NADA Show in New Orleans, January 23-26.

Driven by a range of appealing factors including lower monthly payments and a wider array of models—due to the continuous rise in new vehicle inventory—leasing has reappeared as an optimal choice for consumers who are in the market for a vehicle. According to Experian’s State of the Automotive Finance Market Report: Q2 2024, leasing increased to 25.35%, up from 21.14% in Q2 2023 and 19.30% the year prior. While the average monthly payment and interest rate for a new loan modestly increased year-over-year, leasing is increasingly becoming a more attractive option for those leaning towards flexibility and affordability. For example, the average monthly payment on a leased vehicle was $148 less than a loan this quarter. What’s more, it seems consumers are leaning towards larger vehicles. For instance, the Honda CR-V (2.98%) continued to lead the top leased models in Q2 2024, and it was followed closely by the Tesla Model Y (2.61%). Rounding out the top five were the Honda Civic (2.29%), Ford F-150 (2.02%), and Chevrolet Silverado 1500 (1.86%). Prime financing grows and lease payments decline across all segments When looking at risk distribution trends in Q2 2024, prime consumers accounted for nearly 70% of the total finance market—with prime coming in at 37.82%, down from 39.84% last year and super prime increasing from 28.98% to 31.59% year-over-year. Subprime also saw a slight increase, going from 13% to 13.06% during the same period. It’s notable that all risk segments experienced a decrease in average monthly payments for leased vehicles, as super prime went from $601 in Q2 2023 to $586 in Q2 2024, prime declined to $583 this quarter, from $596 last year, and subprime was at $597, from $611. With the average monthly payments declining year-over-year for majority of shoppers, it can potentially create a more competitive market and drive more consumers towards this finance option—something automotive professionals should keep a close eye on. New and used vehicle finance market overview Data in Q2 2024 found that new vehicle loan amounts increased slightly, reaching $40,927, up from $40,743 last year, and the average interest rate went from 6.78% to 6.84% year-over-year. Despite the increases, the average monthly payment for a new vehicle only experienced a $1 growth to $734 this quarter. On the used side, the average loan amount declined from $27,316 Q2 2023 to $26,248 in Q2 2024, and the average rate grew from 11.47% to 12.01% in the same time frame. Though, the average monthly payment declined to $525 this quarter, from $536 last year. As the automotive industry continues to adapt to the changing market conditions and consumer preferences, it’s important for professionals to leverage the most current data—this will allow them to effectively assist consumers by meeting their financial needs with the available options. To learn more about automotive finance trends, view the full State of the Automotive Finance Market: Q2 2024 presentation on demand.