Experian recently released their State of the Automotive Finance Market report for the first quarter of 2019. The Q1 2019 report found that certain trends, such as the rising prices of new cars, haven't shown signs of slowing. This trend is causing a shift in the lending landscape, which includes an increase in used car sales and leasing.
More Consumers Turning Toward Used Cars
With the industry still focused on rising new car prices, one trend that has emerged is that borrowers with the best credit are turning to used vehicles for their affordability. During the first quarter of 2019, the average new car loan rose above $32,000. The average used vehicle loan also hit a record high, rising $601 year-over-year to $20,137.
More prime and super-prime consumers are turning to used cars in order to combat the rising prices of new cars. The first quarter of 2019 showed a record-high number of borrowers choosing to finance used cars.
Prime buyers for used vehicles increased to 61.88% from 60.64% year-over-year, with the super-prime segment showing the most growth at 44.78%, up from 43.06% year-over-year. Even nonprime consumers are leaning more heavily toward used vehicles purchases, rising from 70.72% to 71.48% year-over-year.
Along with the lending trend shifting toward used cars, the average loan terms are adjusting as well, with the average new car loan term decreasing 0.18 months year-over-year to 68.85 months. The average used car loan term rose 0.44 months year-over-year to 64.67 months.
Rising New Car Costs Drive Payments Up
With average loan amounts rising across the board, average monthly loan payments rose across every credit tier for both new and used loans.
The average monthly payment for a new car loan reached a record high, topping $550 across all credit tiers. The highest average loan was in the nonprime tier, where payments averaged $574 a month for a new vehicle. The biggest increase, however, was seen in the prime tier, with the average new loan car loan payment rising $35 year-over-year to $563.
Even as average monthly payments increase, the gap between new and used loan payments continues to grow, widening to $163 on average – an increase of $12 a month year-over-year. In addition, the gap between new and used car payments widened across all credit tiers.
Notable Data Points from the First Quarter of 2019
As with most other data points for Q1 2019, interest rates increased as well, with the average new car interest rate remaining above 6%, at 6.16%, an increase of 0.99%. The average used car interest rate also rose 0.88% to 10.06%.
Some other notable findings include:
- Subprime originations have dropped to record lows.
- Total outstanding auto loan balances hit $1.181 billion.
- Outstanding loan balances with subprime and deep subprime consumers fell to 18.77% from 19% of all loans.
- The average credit score for used car buyers increased to 657 from 655 year-over-year.
- Average credit score for new car buyers remained level at 719 year-over-year.
- The average loan term for new cars dropped 0.18 months to 68.85 months, while the average used car loan term rose 0.44 months to 64.67 months.
- The gap between average new and used loan payments continues to widen, reaching a $163 difference in Q1 2019.
Overall, industry talk continues to surround decreasing vehicle affordability, but also touches on delinquency trends – which rose overall for Q1 2019 to an average of 1.98% for 30-day delinquencies. This is still well below the record high average delinquency rate of 2.81% seen a decade ago in Q1 2009.
"While vehicle affordability continues to be top of the 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, the Senior Director of Automotive Financial Solutions for Experian.
"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."
Get More Shoppers in Your Door
In light of the trends that emerged in the first quarter of 2019, you need to get shoppers in your doors that are serious about buying, despite increasing new car prices. That's where we can help. At Auto Credit Express, we've been providing award-winning service to dealers like you for over 20 years.
We are a top subprime lead generator, and can provide new and used car leads, as well, through our partnership with CarsDirect Connect. See what we can do for your store by calling us as 888-535-2277, or fill out our contact form online and we'll be in touch with you.