Tag Archive | "Auto Loan Terms"

Payment Gap Between New and Used Hits All-Time High in Q2, Experian Reports


SCHAUMBURG, Ill. — Experian Automotive reported today that the gap between the average monthly payments for new and used vehicles during the second quarter reached a record $122 — the largest margin since Experian began publicly reporting auto finance data in 2008.

According to the firm, the average monthly payment for a new vehicle was $483, while the average monthly payment for a used vehicle was $361. But not only did the monthly-payment gap widen during the quarter, so did gap in total loan amounts, with the average new-vehicle and used-vehicle finance amounts reaching $28,524 and $18,671, respectively — a difference of $9,853.

“As the price of new vehicles continues to rise, and the gap between monthly payments for new and used vehicles widens, we see more and more consumers looking for ways to keep their vehicle payments affordable,” said Melinda Zabritski, Experian’s senior director of automotive finance. “This could be especially true for consumers who have the financial ability to pursue a new vehicle but may have sticker shock at the rising prices and don’t want the accompanying high monthly payments.”

And consumers took advantage of stretching loan terms to keep their monthly payments affordable, especially for used vehicles. According to Experian, the percentage of used vehicles financed for 73 to 84 months increased by 14.8% from a year ago to 16.1% — the highest percentage on record. Additionally, new vehicles financed for the same term length climbed 19.7% from a year ago to 28.8% in the second quarter.

Leasing also continued to be a popular option for payment-conscious car buyers, with the transaction type’s share of all vehicles financed during the quarter rising 30.2% from a year ago to 31.5%. And according to Experian’s analysis, lease terms extended past the 36-month average into the 37- to 48-month range, an 18% increase. Additionally, the average lease payment dropped $13 a month from a year ago to $394.

“The automotive finance market continues to progress in response to consumer demand,” said Zabritski. “The availability of different financing options allows consumers to stretch their dollar and more easily find a vehicle that meets their budgetary needs.”

Experian Automotive also reported that the share of used-vehicle financing rose from 53.8% one year ago to an all-time high of 55.5 percent. Also reaching a record high was the percentage of new vehicles financed, which rose from 85% in the year-ago period to 85.8%.

The average credit score for a new-vehicle loan dropped two points from last year to reach 709, while the average credit score for a used loan increased one point to 645 over the same time period.

Also during the second quarter, the average interest rate for a new-vehicle loan was 4.8%, up from 4.6% in the year-ago period. The interest rate for used vehicle loans was 9.1 percent, up from 8.8 percent over the same time period.

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Experian: Average Loan Terms Stretch to Record High


SCHAUMBURG, Ill. — Loan terms are continuing to stretch, with the average automotive loan term reaching 66 months for the first time, according to data from Experian Automotive.

According to the firm’s latest State of the Automotive Finance Market report, loan terms in the first quarter reached their highest level since the company began publicly reporting the data in 2006. The analysis also showed that loans with terms extending out 73–84 months accounted for 24.9% of all new-vehicle loans originated during the quarter, a 27.6% increase from the year-ago period.

The average amount financed for a new-vehicle loan also reached an all-time high, climbing $964 from a year ago to $27,612 in first quarter. Additionally, the average monthly payment for a new-vehicle loan reached its highest point on record, rising from $459 in the year-ago period to $474 in the first quarter.

“As the cost of purchasing a new vehicle continues to rise, consumers clearly are stretching the loan term to help lower monthly payments, keeping them at a manageable level,” said Melinda Zabritski, Experian Automotive’s senior director of automotive credit. “The benefit of a longer term loan is the lower monthly payment; however, the flip side of that is consumers can find themselves paying more in interest or being upside-down on their loan if they seek to trade their vehicle in early.”

Consumers also continued to lease new vehicles at record levels. Of all new vehicles financed in the first quarter, 30.2% were leased vs. 27.5% in the first quarter 2013. And of all new vehicles sold (whether financed or purchased in cash), a staggering one in four, or 25.6%, were leased in first quarter vs. 22.9% in the year-ago period.

Overall, loans and leases for new vehicles were easier to obtain in first quarter 2014. For new-vehicle loans, the average credit score was 714, down from 722 in first quarter 2013. For leases, the average credit score was 721 in first quarter 2014, compared to 731 in the same period 2013.

“Over the last several quarters, leasing has come back as a very desirable option for consumers,” Zabritski noted. “Whether they are interested in getting the latest and greatest models or simply do not want to commit to a long-term purchase, consumers are leasing new vehicles in greater numbers than ever before. However, what they need to remember is that without good credit, it may be more difficult to get a lease, and that leases have mileage caps so they need to make sure their lifestyle fits the leasing requirements.”

Experian Automotive also reported that market share for nonprime, subprime and deep subprime new-vehicle loans rose slightly from 33.68% one year ago to 34.34% in the first quarter. For used vehicles, nonprime, subprime and deep subprime loans accounted for 64.2% of all loans, down 2.6% from 65.91% in first quarter 2013.

Here are additional trends highlighted in Experian Automotive’s report:

  • The average credit score for a used-vehicle loan in first quarter was 641, up from 637 in first quarter 2013.
  • Average monthly payments for used vehicles rose from $348 in first quarter 2013 to $352 in first quarter 2014.
  • New-vehicle interest rates rose from 4.47 in first quarter 2013 to 4.54% in first quarter 2014.
  • Used-vehicle interest rates rose from 8.75% in first quarter 2013 to 9.01% in first quarter 2014

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