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Average loan amount and monthly payment break records, while average term hits 68 months
Schaumburg, Ill., June 02, 2016 — As the average loan amount and monthly payment for new vehicles continue to trend upward, leasing reached its highest level on record, Experian Automotive announced today. According to its most recent State of the Automotive Finance Market report, leasing accounted for 31.1 percent of all new vehicle transactions during the first quarter of 2016. Additionally, while leasing is still predominately an option for new vehicle financing, used vehicle leasing increased 2.1 percent from a year ago.
“The continued rise in new vehicle costs have kept many consumers exploring options to keep their monthly payments affordable,” said Melinda Zabritski, Experian’s senior director of automotive finance. “As long as vehicle prices continue to rise, we can expect leasing rates to grow along with them. However, consumers need to understand the nuances of their lease agreements and make sure that leasing fits their lifestyle.”
Findings from the report also show an increase in the percentage of prime consumers who shifted to the used vehicle market. In fact, prime borrowers elected to purchase a used vehicle more than 54 percent of the time in Q1 2016, a 4.8 percent increase from the previous year.
However, the opposite is true for the new vehicle finance market. While the percentage of subprime borrowers in the total loan market decreased 1.1 percent, the percentage of subprime borrowers for new vehicles saw a 5.5 percent increase from a year ago.
“The record highs we have seen in vehicle prices also have had a significant impact on the loan market,” continued Zabritski. “For example, the number of prime borrowers who switched to leasing has driven an increase in the percentage of subprime borrowers shown in the new vehicle segment. As a result, we will continue to see consumers view used vehicles, longer-term loans and leasing as a way to keep payments affordable.”
The shifts in risk tier distribution for new and used vehicles also is reflected in average credit scores. The average credit score for a new vehicle loan was 710, down three points from the previous year, while the average credit score for a used vehicle loan was up three points to 645.
Additional insights from the Q1 2016 report:
• The percentage of new vehicles financed was 86.3 percent, up 1.6 percent from a year ago.
• The average loan amount for a new vehicle reached $30,032, an all-time high, while the average loan amounts for used vehicles were $20,723 (franchise dealers) and $16,124 (independent dealers) — both Q1 highs.
• The average loan terms for new vehicles, used vehicles from franchise dealers and used vehicles from independent dealers all increased by one month, reaching 68, 66 and 58 months, respectively.
• The average interest rates were 4.79 percent for a new vehicle loan, 7.81 percent for a used vehicle loan at a franchise dealer and 12.22 percent for a used vehicle loan at an independent dealer.
• Average monthly payments for new vehicle loans reached an all-time high — $503. Average monthly payments for used vehicle loans were $376 at a franchise dealer and $351 at an independent dealer.
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About Experian Automotive
Experian Automotive provides information services and market intelligence that enables results-driven professionals to gain the fullest possible understanding of the market, the vehicles and the people who buy them. Its North American Vehicle DatabaseSM houses data on nearly 700 million vehicles and, when combined with Experian’s credit, consumer and business information, provides an integrated perspective into the automotive marketplace. Experian Automotive’s AutoCheck® vehicle history reports provide dealers and consumers with in-depth information, allowing them to confidently understand, compare and select the right vehicles. For more information on Experian Automotive and its suite of services, visit our Website at http://www.experian.com/automotive.
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