Loan Amounts Reach Record Highs in Q3
SCHAUMBURG, Ill. — The average dollar amount for both new and used vehicle loans reached all-time highs in the third quarter of 2014, according to Experian Automotive’s latest State of the Automotive Finance Market report. The average loan amount for a new vehicle was $27,799 in the third quarter of 2014, up $1,080 from the ... Read More »
SCHAUMBURG, Ill. — The average dollar amount for both new and used vehicle loans reached all-time highs in the third quarter of 2014, according to Experian Automotive’s latest State of the Automotive Finance Market report. The average loan amount for a new vehicle was $27,799 in the third quarter of 2014, up $1,080 from the previous year. Used vehicle loans increased $676, reaching $18,576 over the same time period.
With the continued growth in loan amounts, the quarterly findings also showed consumers leasing at a higher rate, as well as taking out longer loans. The report found that leasing accounted for 29.1% of all new vehicle financing in third quarter 2014, up 7.1% from a year ago. New vehicle loans in the 73- to 84-month range grew by 23.7% in third quarter 2014 compared with the previous year, while used loans in the same range grew by 18% from a year ago.
“Car buyers tend to shop with a monthly payment in mind. As a result, we are continuing to see them turn to leasing and longer loan lengths as strategies to keep payments down and make vehicles more affordable,” said Melinda Zabritski, senior director of automotive finance for Experian. “As car values continue to reach new heights, these insights will help dealers, lenders and consumers become more aware of the options available to them to keep people buying cars, all while staying within their budgets.”
Furthermore, the report found that the average monthly payment for new and used vehicle loans increased from the previous year. The monthly payment for a new loan reached $470, up $12 from a year ago, while the monthly payment for a used loan reached an all-time high of $358, an increase of $8 over the same time period.
Additional findings from the report showed that interest rates for new vehicle loans increased slightly in the third quarter, climbing 4.7% from a year ago. However, despite the growth, these rates have decreased each quarter in 2014. Interest rates for used vehicle loans decreased to 8.5% in the quarter.
“As consumers explore the different options available to them to keep their monthly payments low, they have to remember interest rates often can play a factor. Making timely payments and becoming a low credit risk are the easiest ways to ensure a low interest rate,” continued Zabritski. “For example, the average interest rate for super-prime consumers on a new loan was 2.6%, compared with 12.7% for deep-subprime consumers. Understanding how on-time payments influence credit scores, can help consumers improve their financing experience.”
The report also noted that the average credit score for a new vehicle loan was 713 in the third quarter of 2014, down 3 points from a year ago, while the average credit score for a used vehicle loan rose 2 points to 650.
Captives were the only lender type to see an increase in market share year over year, up 28.9%. Meanwhile, a record-high 54.1% of all used vehicle transactions were financed, up from 52.6% in third quarter 2014. For new vehicles, 84.8% of all transactions were financed in third quarter 2014, which was unchanged from the previous year.
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