For finance companies that like to book as much used-vehicle paper as they can originate, the latest Experian data shows institutions are not having to take on as much risk to fill that portion of their portfolio objectives.
Findings from the Q1 2019 State of the Automotive Finance Market report showed that the percentage of consumers choosing used vehicles reached all-time highs. Analysts noticed the figure for prime hit 61.88 percent, and the super-prime reading reached 44.78 percent.
Experian explained in a news release distributed on Thursday morning that this trend comes as questions around vehicle affordability continue to dominate industry conversations.
The average amount financed for a new vehicle surpassed $32,000 in Q1, while the average amount financed for a used vehicle was slightly above $20,000. Additionally, the average monthly payment for a new vehicle was $554, and the average monthly payment for a used vehicle was $391.
“While vehicle affordability continues to be top of mind for the industry, consumers are actively seeking ways to ensure they can afford the vehicle they purchase — a positive sign for all parties involved,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions.
“It’s important that lenders and dealers continue to monitor these trends so they can work with car shoppers to help them find the right vehicle with the right financing options,” Zabritski continued.
The other side of the affordability conversation has focused on delinquency trends.
In Q1, Experian reported 30-day delinquencies saw an increase to 1.98 percent, up from 1.9 percent a year ago. That said, banks, credit unions and finance companies all saw slight decreases in 30-day delinquency rates, and 60-day delinquencies remained relatively stable at 0.68 percent year-over-year.
Zabritski pointed out that it’s important to keep in mind that the 30-day delinquency rate is still below the high-water mark in Q1 2009 when it soared to 2.81 percent during the Great Recession.
“The delinquency rate is certainly a trend worth keeping an eye on, but it’s important to consider it within the larger historical context,” Zabritski said. “Other factors, like subprime originations remaining at historic lows, help paint the full picture of the industry.”
Experian mentioned additional findings for Q1 included:
• Outstanding automotive balances totaled $1.181 billion.
• The percentage of outstanding loan balances held by subprime and deep-subprime consumers dropped below 19% (18.77%).
• Credit scores remained stable, with some improvement seen in used, which increased from 655 to 657 year-over-year. The average new credit score (719) is the same as Q1 2018.
• Average new loan terms decreased to 68.85 months, while average used loan terms increased to 64.67 months.
• The percent of used vehicles that are leased saw a slight year-over-year increase from 4.01% in Q1 2018 to 4.68%.
• The gap between the average new and used monthly payments continued to widen, reaching $163.