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Gap between new and used payments continues to widen as average monthly payments reach new highs
Schaumburg, Ill., Aug. 30, 2018 — Automotive loan amounts and monthly payments continue to reach new highs, but consumers seem unfazed. According to Experian’s State of the Automotive Finance Market report released today, the percentage of 30- and 60-day delinquencies improved during Q2 2018.
Findings show 30-day delinquencies dropped to 2.11 percent from 2.2 percent a year ago, while 60-day delinquencies dropped to 0.64 percent from 0.67 percent over the same time period.
“As we monitor the health of the automotive market, delinquencies are one of the most telling metrics. If this downward trend continues, it can be an encouraging sign,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions. “Moving forward, lenders will want to keep a close eye on car buyers’ payment performance. Understanding these trends and leveraging the power of data helps lenders make the right decisions when analyzing risk.”
But while delinquencies trend downward, affordability remains a point of industry interest, as average loan values continue to rise across the spectrum. The average new vehicle loan amounts jumped more than $700 year-over-year to $30,958 in Q2 2018, while used vehicle loan amounts increased $520 to reach $19,708. Moreover, new and used vehicle monthly payments hit record highs during the quarter, with the average new monthly payment increasing $20 year-over-year to $525, and the average used monthly payment increasing $13 over the same time period, reaching $378.
Taking an even closer look at the data, lenders can gain insights from the gap between new and used financing payments, which continues to widen, reaching $147 in the second quarter. For some consumers, that gap can mean the difference between buying a new or used vehicle.
The report also shows that consumers are increasingly looking to credit unions to secure an automotive loan. Credit unions saw double-digit growth for new vehicle financing (12.9 percent) and strong growth overall (4.9 percent), closing in on 21.3 percent of the market at the end of Q2. The only other lender type to experience growth was captive finance companies, which grew 1.2 percent during the same time period.
Additionally, compared with last year, lenders appear to be more conservative as market share for subprime and deep-subprime automotive loans continues to fall. Deep subprime hit an all-time low of 3.54 percent, compared with 3.98 percent in Q2 2017. Overall, subprime and deep subprime fell to less than 19 percent of the loan market. As a result, average credit scores for new and used vehicle financing continue to improve, reaching 715 and 655, respectively.
“Having access to quality credit is something every consumer deserves, regardless of the type of financing used. As the cost of vehicles rises, lenders need to make sure they’re leveraging all available data so they can offer comprehensive financing options to all consumers,” Zabritski said. “Consumers can also take steps to make sure they’re financially ready when looking to buy a car. We’re seeing the positive trend of on-time payments, which is just one step toward improving credit scores.”
• Outstanding loan balances hit a record high but experienced slowing growth, reaching $1.149 trillion in Q2 2018, up from $1.027 trillion in Q2 2016.
• Leases decreased slightly year-over-year, from 30.83 percent in Q2 2017 to 30.41 percent in Q2 2018.
• 72 months remains the most common loan term for both new and used loans.
• Market share for banks dropped to 31.6 percent in Q2 2018 from 32.3 percent in Q2 2017.
• Interest rates increased across all loan types, with the exception of used loans in the deep-subprime segment.
To view the entire State of the Automotive Finance Market report webinar, visit https://www.experian.com/automotive/automotive-webinars.html.
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