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Experian: Total Balances, Amount Financed Reach Record Highs in Q4 2016

March 2, 2017

SCHAUMBURG, Ill. — Rising transaction prices were the story again in the auto finance arena in the fourth quarter of 2016, causing average amounts financed to reach record levels and terms to stretch, according to Experian Automotive.

The firm reported today that that the average amounts financed for new and used vehicle reached record highs of $30,621 and $19,329, respectively. The latter was up from $18,850 in 2015’s fourth quarter. New-vehicle loans with terms between 72 and 84 months increased from 29% in the year-ago period to 32.1%, while used-vehicle terms within the same term band increased from 16.4% to 18.2%

“With the average loan amount for new and used vehicles hitting all-time highs, we are seeing the need for affordability drive consumer purchasing behavior,” said Melinda Zabritski, Experian’s senior director of automotive finance. “Our latest research shows an $11,000 gap between the average loan amount on a new and used vehicles — the widest we have ever seen. This upward trend is causing many consumers to find alternative methods like extending loan terms, getting a short-term lease or opting for a used vehicle to get what they want while staying within their monthly budget.”

The average lease payment, which rose $2 from a year ago to $414, was, on average, $92 less than a traditional finance payment, according to the firm. Additionally, leasing accounted for 28.94% of all vehicles financed during the period, up from 28.87% in the year-ago quarter.

Experian’s fourth quarter data reveal two other trends: a shift by finance sources toward prime and an uptick in delinquencies.

Thirty-day delinquencies inched up slightly from 2.42% from a year ago to 2.44% in the fourth quarter, while 60-day delinquencies increased from 0.71% to 0.78%. In response, finance sources gravitated more toward customer with better credit during the period.

For new-vehicle financing, the average credit score for a new-vehicle loan rose two points from a year ago to 714, while the average for used jumped five points to 654. The period also saw the percentage of subprime and deep-subprime financing decrease from 22.05% in the year-ago period to 20.82%. In contrast, loans extended to buyers with superprime credit accounted for 59.41% of all vehicles financed during the period, up from 57.86% in the year-ago period.

“Delinquencies are always an important indicator of the overall health of the automotive lending market, but it’s equally important to watch how lenders react when they see a rise,” Zabritski said. “The shift to a higher percentage of prime and subprime customers is a natural consequence of the slight growth in delinquencies. Overall, we are still looking at a very healthy lending market.”

The report also showed that used-vehicle financing grew 5.4% from a year ago to 41.85%. Moreover, used superprime financing originated at franchised and independent dealers increased 5.91% and 13.8%, respectively.

Also reaching a new high were auto loan balances, which increased by $987 billion from a year ago to a record $1.072 trillion; however, the firm did observe that year-over-year growth is slowing.

By finance segment, market share for banks fell from 35.6% in the year ago quarter to 32.9%, while credit unions increased their share from 18% to 19.1%. Captives grew their share from 27.8% to 28.4%.

Additionally, the average monthly payment for new-vehicle financing rose $493 from a year ago to $506, while the average monthly payment rose from $359 to $364.

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