Experian Automotive — financing to subprime borrowers begins to throttle back
Used vehicle loan and monthly payment amounts reach all-time high
Schaumburg, Ill., Sept. 03, 2014 — Experian Automotive today announced that the percentage of new vehicle loans to subprime and deep subprime borrowers began to level off in Q2 2014. According to its latest State of the Automotive Finance Market report, the percentage of new vehicle loans going to consumers in the subprime and deep subprime segments was at 15.1 percent in Q2 2014, down from 22.1 percent in Q2 2013. While up from the 10.2 percent low at the peak of the recession in 2009, the current figures are still well below the prerecession level highs of 16.6 percent in Q2 2008 and 19.9 percent in Q2 2007.
Similarly, the percentage of used vehicle loans extended to the subprime and deep subprime segments in the quarter was 40.2 percent, down from 50.6 percent in Q2 2013. Again, the figures are up slightly from the 39 percent seen in Q2 2009, but still below the prerecession levels in 2008 and 2007 of 43.4 percent and 46.6 percent, respectively.
“Although we’ve seen relative stability in the automotive industry the past several years, lenders are still showing cautionary signs when lending to the subprime market and keeping their risk at manageable levels,” said Melinda Zabritski, senior director of automotive finance for Experian. “As for consumers, as long as those in these higher risk segments continue to pay their bills on time, keep delinquent balances in check and select a vehicle that fits within their budget, they should still be able to obtain the necessary financing to purchase a vehicle that meets their needs.”
Additionally, the average loan amounts extended to subprime and deep subprime consumers also fell in Q2 2014. The average new vehicle loan amount to a subprime borrower dropped to $27,347 in Q2 2014 from $27,563 in Q2 2013, and new loans to deep subprime borrowers fell to $24,836 in Q2 2014 from $25,486 in Q2 2013. For used vehicles, the average subprime borrower loan fell to $16,546 in Q2 2014 from $17,020 in Q2 2013. Used deep subprime loans fell to $14,358 Q2 2014 from $15,113 in Q2 2013.
Average amounts for used vehicle financing on the rise
Findings from the report also showed that the average loan amount and monthly payment for a used vehicle reached an all-time high in the second quarter of 2014. The average used vehicle loan was $18,258 in Q2 2014, up $345 from the previous year. Similarly, the average monthly payment for a loan written on a used vehicle was $355 in Q2 2014, up $4 from Q2 2013.
“Used vehicle financing has experienced consistent growth over the last several years,” continued Zabritski. “As we continue to see the price of vehicles reach new heights, more and more consumers, especially those that are credit challenged, are turning to the used vehicle market as a viable option to purchase their next car.”
As for new vehicles, the report showed that the average amount financed rose in Q2 2014 to $27,429 from $26,526 in Q2 2013. The average monthly payment for a new vehicle, also increased $10 to $467 in Q2 2014
In other trends:
• Of all new vehicles sold in Q2 2014, leases accounted for a record high 25.6 percent, up from 23.4 percent the previous year
• The interest rate for a new vehicle was up from 4.46 percent in Q2 2013 to 4.59 percent in Q2 2014
• Used vehicle interest rates were up from 8.56 percent in Q2 2013 to 8.82 percent in Q2 2014
• The average credit score for a new vehicle loan in Q2 2014 was 711, up from 699 a year earlier
• The average credit score for a new vehicle lease rose to 717 in Q2 2014 from 706 in Q2 2013
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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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