The Automotive Finance Market Shows Signs of Optimism in Q3 2023

Published: December 4, 2023 by Melinda Zabritski

Full length of woman standing amidst cars in showroom

While affordability concerns have remained top of mind over the past few years, the third quarter of 2023 showed positive signs for consumers in the market for a vehicle.

According to Experian’s State of the Automotive Finance Market Report: Q3 2023, the average new vehicle loan amount decreased to $40,184, from $41,543 in Q3 2022 and the average used vehicle loan amount went from $28,684 to $27,167 year-over-year.

This is an indicator that the market is continuing to stabilize, considering from Q3 2021 to Q3 2022 new vehicle loan amounts increased $3,698 and used vehicle loan amounts increased $2,379.

Despite average loan amounts declining, data shows average monthly payments experienced a slight increase—potentially due to the rise in interest rates. For instance, the average monthly payment for a new vehicle came in at $726 in Q3 2023, from $701 last year and the average monthly payment for a used vehicle went up $4 year-over-year, reaching $533 this quarter.

Additionally, the average interest rate for a new vehicle went from 5.26% in Q3 2022 to 7.03% in Q3 2023 and the average rate for a used vehicle increased from 9.38% to 11.35% in the same time frame.

Consumers continue to choose shorter-term loans for new vehicles

As a result of higher interest rates, consumers continued opting for shorter-term loans in the third quarter of 2023, particularly for new vehicles.

In Q3 2023, new vehicles with up to 48-month loan terms increased to 13.40%, from 9.99% in Q3 2022. Additionally, new vehicle loans with 49- to 60-month terms went from 16.50% to 17.16% year-over-year and new vehicle loans with 61- to 72-month terms reached 38.65% this quarter, from 36.67% last year. On the contrary, new vehicle loans with 73- to 84-month terms decreased from 35.11% in Q3 2022 to 29.15% this quarter.

It’s notable that loans up to 48 months offered an average interest rate of 4.03% in Q3 2023, while the average rate for 49- to 60-months was 5.67%, followed by 61- to 72-months at 7.24%, 73- to 84-months at 8.80%, and 85+ months at 8.81%.

To learn more about automotive finance trends, view the full State of the Automotive Finance Market: Q3 2023 presentation on demand.

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