Experian Report on the State of the Automotive Finance Market

With Rising Vehicle Prices, Experian Finds Consumers Continue to Uncover Ways to Manage Monthly Payments – New report shows a record percentage of prime borrowers opting for used vehicles, as loan terms reach a new high and new vehicle loan amounts remain above $32,000

Affordability continues to remain top-of-mind for most in the automotive industry; however, consumers appear to be making due. According to Experian’s Q2 2019 State of the Automotive Finance Market report, consumers are exploring all available options to make costs more manageable, including extending loan terms, and deciding between new or used vehicles.

One of the more notable ways consumers have managed to make their monthly payments more affordable is to opt for used vehicles. In fact, prime and super prime consumers financed used vehicles at record levels – these borrowers comprised more than 57 percent of used vehicle financing during the second quarter.

The shift to used vehicles comes as the average loan amounts for vehicles continue to rise. Based on the report, the average amount for a new vehicle loan amount was $32,119, while the average used vehicle loan amount hit $20,156. Additionally, the average monthly payments were $550 and $392 for new and used, respectively.

The report also found that consumers appear to be managing payments by extending loan terms. The average loan terms for new and used vehicles reached record highs. For new vehicles, the average loan term was 69.17 months, while the average loan term was 64.82 months for used vehicles. The extension of loan terms come as interest rates continue to remain more than 6 percent for new vehicles and more than 10 percent for used.

There are some industry pundits that continue to be concerned that consumers can’t handle larger payments, however the data tells a different story. Delinquencies remained stable in Q2 2019. Thirty-day delinquencies dropped to 2.11 percent, from 2.12 percent in Q2 2018, while 60-day delinquencies saw a slight increase from 0.64 percent to 0.65 percent in the same time frame.

Additional findings for Q2 2019:

Outstanding automotive loan balances totaled $1.197 billion.
The percentage of outstanding loan balances held by subprime and deep-subprime consumers saw slight growth YOY (from 18.81 percent in Q2 2018 to 18.95 percent in Q2 2019) but remained below 19 percent.
New vehicle leasing saw a slight decrease from 30.41 percent in Q2 2019 to 30.04 percent in Q2 2019.
Credit scores saw a two-point increase for new vehicle financing (from 715 to 717) while used saw a one-point increase (655 to 656) YOY.
The average price difference in monthly payments between loans and leases is $92.