In recent years, the automotive industry has witnessed average loan amounts spike due to ongoing inventory challenges. Though, in the fourth quarter of 2022, we are beginning to see numbers level out—a positive sign that the market is bouncing back.
Experian’s State of the Automotive Finance Market Report: Q4 2022 found that the year-over-year (YOY) average new loan amount increased 4.04%, a smaller growth rate compared to 12.46% YOY in Q4 2021, while the average used loan amount dropped from a 20.96% YOY increase last year to only a 1.38% YOY increase this quarter.
The average loan amount financed for a new vehicle increased to $41,445 in Q4 2022, from $39,834 in Q4 2021 and $35,420 in Q4 2020. On the used side, the loan amount increased to $27,768 this quarter, from $27,390 the previous year and $22,643 in Q4 2020.
While the loan amount increases weren’t as drastic compared to previous years, we are still witnessing considerable growth in average monthly payments due to increased interest rates.
In Q4 2022, captives offered a 5.45% interest rate for new vehicles, from 3.14% in Q4 2021 and credit unions increased from 3.61% to 5.49% year-over-year. Banks were considerably higher, with a 7% interest rate, a jump from 4.34% this time last year.
For used vehicles, credit unions had the lowest rate, coming in at 7.03% in Q4 2022, from 5.08% in Q4 2021—while captives and banks offered similar rates, with captives at 9.25% this quarter, up from 7.11% last year and banks having a 9.34% rate, from 6.47% in Q4 2021.
The increased rates resulted in the average monthly payment for a new vehicle hitting $716 this quarter, from $646 in Q4 2021, while the average monthly payment for a used vehicle was $526 in Q4 2022, up from $490 the previous year.
Staying up to date on the latest trends and data will enable automotive professionals to properly assist consumers who are currently in the market for a vehicle and ensure they find a monthly payment that fits their budget.
To learn more about automotive finance trends, view the full State of the Automotive Finance Market: Q4 2022 presentation on demand.