The ongoing trends of more leases and longer loans show no signs of stopping in Experian Automotive’s third-quarter 2015 analysis of auto financing. Buyers continue to search for ways to lower their monthly payment on more expensive models, even if that means extending the bill over prolonged periods of time.
Lease rates reached a record of about 27 percent of all new vehicle transactions, which was a big boost from the 24.7 percent last year. Average monthly payments remained steady at $398 – just $1 more than Q3 2014. “As the price for a new or used vehicle continues to rise, leasing has become a more viable financing option for consumers looking to maintain an affordable monthly payment,” Melinda Zabritski, Experian’s senior director of automotive finance, said in the study.
Many of the figures for auto loans continued their march upward, but buyers’ average credit score dropped to 710 – the lowest number since Q3 2007. The average amount that a person financed on a new vehicle rose to $28,936 , which was an increase of $1,137 from the same period in 2014. To pay off the larger sum, 44 percent of these buyers had a loan between 61 and 72 months – an all-time record. Financing for 73 to 84 months also reached a quarterly record of 27.5 percent. The value of these outstanding notes achieved a record $886 billionat the end of last year.
Automakers reap many of the rewards of these larger, longer loans because they’re responsible for a significant portion of new vehicle financing. According to Experian, the lenders that the companies own financed 51.6 percent of models during Q3 versus 36.8 percent in the same quarter of 2011.
CONSUMERS LOOK TO KEEP MONTHLY PAYMENTS AFFORDABLE AS LEASING REACHES A RECORD HIGH
Captives see largest share of new vehicle financing since the recession
Schaumburg, Ill., Dec. 02, 2015 — Experian Automotive today announced that consumers continue to lease vehicles at a record pace. According to the Q3 2015 State of the Automotive Finance Market report, leasing accounted for nearly 27 percent of all new vehicle transactions, up from 24.7 percent the previous year. This marks the highest percentage of vehicles leased since Experian began tracking the data publicly in 2006. Findings from the report also showed that the average monthly lease payment was $398 during the quarter, up $1 from a year ago.
“As the price for a new or used vehicle continues to rise, leasing has become a more viable financing option for consumers looking to maintain an affordable monthly payment,” said Melinda Zabritski, Experian’s senior director of automotive finance. “While consumers can save an average of $84 per month by leasing rather than taking out a loan on a new vehicle, they should make sure leasing fits their lifestyle. Oftentimes there are mileage caps and other considerations that consumers should familiarize themselves with before entering into a leasing agreement.”
Rising vehicle prices also have given way to record loan amounts for new and used vehicles. During the third quarter of 2015, the average amount financed for a new vehicle was $28,936, up $1,137 from the previous year. The average amount financed for a used vehicle was $18,866, up $290 over the same time period. Furthermore, the gap between new and used loan amounts also has grown. On average, consumers finance $10,070 less on a used vehicle than on a new one.
Extending loan terms is another method consumers turned to in order to keep monthly payments low. During the third quarter of 2015, the percentage of consumers who took out new and used vehicle loans with terms between 61 and 72 months reached all-time highs. For new vehicles, approximately 44 percent took out 61- to 72-month loans, and more than 41 percent financed a used vehicle for the same duration. The percentage of consumers extending their loans even longer also has increased. Loans for new vehicles extending 73 to 84 months increased 17.1 percent over the previous year, reaching a Q3 record high of 27.5 percent. Used vehicle loans extending in the 73- to 84-month term, however, reached an all-time high of 16.2 percent (a 12 percent increase over the previous year).
Captive lenders gain ground
One of the biggest shifts in the automotive lending industry during Q3 2015 was the resurgence of captive lenders — the lending companies owned by vehicle manufacturers. In the third quarter of 2015, captive lenders financed 51.6 percent of new vehicle loans, up from 36.8 percent in Q3 2011. This represents the largest market share of new vehicle financing for captives since the recession.
Market share findings for other lending types show banks still holding the largest share for new and used vehicle loans combined, at 34.7 percent. Finance companies, which get most of their business from customers with subprime and deep-subprime credit, gained share year over year, reaching 13.34 percent in Q3 2015, up 6.4 percent from the previous year.
“Captive lending has made a comeback since suffering a steep drop-off caused by declining new sales and lender-type shifts during the recession,” Zabritski continued. “This is good news for manufacturers, as their captive finance companies often provide an additional source of revenue as well as a strong pipeline to credit for their dealer networks.”
• Consumers continue to rely on financing; the percentage of new vehicles financed reached an all-time high of 86.6 percent
• The average credit score for a new vehicle loan fell to 710, the lowest since Q3 2007
• During Q3 2015, the average monthly payment for a new vehicle was $482, up $12 from the previous year
• The average monthly payment for a used vehicle reached $361, an increase of $3 from a year ago
• The average interest rate for a new vehicle hit 4.63 percent, while the average interest rate for a used vehicle reached 8.76 percent
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.
We are the leading global information services company, providing data and analytical tools to our clients around the world. We help businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making.
We also help people to check their credit report and credit score, and protect against identity theft. In 2015, we were named by Forbes magazine as one of the “World’s Most Innovative Companies.”
We employ approximately 17,000 people in 38 countries and our corporate headquarters are in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2015, was US$4.8 billion.
To find out more about our company, please visit http://www.experianplc.com or watch our documentary, “Inside Experian.”
Experian and the Experian marks used herein are trademarks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the property of their respective owners.