Consumers with strong credit make up more than 50 percent of used vehicle financing – the highest Q4 level since 2009

Auto finance market shows continued growth, with outstanding loans totaling $1.229 trillion

Schaumburg, Ill., March 04, 2019 — The percentage of prime consumers financing used vehicles continues to increase, according to Experian’s Q4 2019 State of the Automotive Finance Market Report. Prime consumers opting for used financing surpassed 50 percent—the highest percentage in Q4 since 2009. Furthermore, used vehicle financing saw the largest growth year-over-year among super prime consumers, from 12.55 percent in Q4 2018 to 13.29 percent in Q4 2019. The trend towards used vehicle financing mirrors previous quarters.

Experian’s research found that prime consumers leverage used financing for a variety of vehicle types, with full-size pickups and entry-level crossover utility vehicles (CUVs) being the most popular, though their selections also include small economy and mid-size vehicles. Full-size pickups made up 15.09 percent of used financing in Q4 2019, while entry-level CUVs weren’t far behind at 15.07 percent of used financing. 

“We’ve seen consumer preferences shift to more expensive vehicles over the last few years. During the same time period, consumers have been increasingly aware of their financial health, and the increase in used financing is a signal they’re keeping this in mind when shopping for a vehicle,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions. “As consumers look at the options available, selecting a used vehicle can be the best fit for their budgets, while not compromising the features they’re looking for.”

Used financing isn’t the only segment seeing prime growth. New financing increased as well– prime consumers comprised more than 72 percent of new vehicle financing in Q4 2019. As more financing goes prime, there’s also been a steady increase in average credit scores, with the average credit scores for vehicle loans reaching 719 for new and 661 for used in Q4 2019.

Positive trends for affordability

Overall, the market continues to grow, with total open automotive loan balances reaching $1.229 trillion. The average loan amount for a vehicle increased in Q4 2019. The average new vehicle loan amount totaled $32,797 during the quarter, while the average used vehicle loan amount reached $20,554.

Despite increases in average loan amounts, delinquency rates stayed relatively flat in Q4 2019, with 30- and 60-day delinquencies at 2.31 percent and 0.79 percent, respectively. Additionally, while average monthly payments continued to increase, the increases were not as dramatic as historically seen. In Q4 2019, the average monthly payment for a new vehicle was $554, a $9 year-over-year increase, and the average monthly payment for a used vehicle was $393, up $6 year-over-year. The more moderate increases in monthly payments were aided by a reduction in average interest rates, which were 5.76 percent for new and 9.49 percent for used in Q4 2019, compared to 6.13 percent and 9.59 percent during the same time last year.

“The data shows numerous positive trends for affordability, including flat delinquencies and lower interest rates, which we expect to continue,” Zabritski said. “All signs point to consumers being able to manage their loans well, which is a strong indicator of stability in the industry.”

Additional findings for Q4 2019:

  • Consumers choosing to lease continued to increase, making up 29.92 percent of new vehicles financed, compared to 28.76 percent of new vehicles in Q4 2018.
  • Subprime loans made up 21.69 percent of total financing in Q4 2019, a slight decrease from Q4 2018 (21.88 percent).
  • Banks continued to increase their market share of vehicle financing, from 30.72 percent to 32.74 percent YOY.
  • Longer loan terms continue to dominate the market, with increases in the 61-72 and 73 – 84-month segments for new vehicle loans (40.5 percent and 30.5 percent, respectively).
  • The average price difference in monthly payments between loans and leases is $93.

To view the entire Q4 2019 State of the Automotive Finance Market report webinar, visit https://www.experian.com/automotive/automotive-webinars.html.