Tag: auto loans
There’s recently been a significant amount of discussion about the stability of the automotive finance industry. Many fear the increase in the volume of delinquent U.S. automotive loans may be an early stage harbinger of the downfall of the automotive industry. But, the fact is, that’s not entirely true. While we certainly want to keep a close eye on the volume of delinquent loans, it’s important to put these trends into context. We’ve seen a steady increase in the volume of outstanding loan balances for the past several years – though the growth has slowed the past few quarters. And while much of the increase is driven by higher loan amounts, it also means there’s been an overall higher volume of vehicle buyers leaning on automotive lenders to finance vehicles. In fact, findings from our Q4 2018 State of the Automotive Finance Market Report show 85.1 percent of all new vehicle purchases were financed in Q4 2018 – compare that to 81.4 percent in Q4 2010 and 78.2 percent in Q4 2006. Suffice it to say, more financed vehicles will undoubtedly lead to more delinquent loans. But that also means, there is a high volume of car buyers who continue to pay their automotive loans in a timely manner. Through Q4 2018, there were nearly 86 million automotive loans and leases that were in good standing. With a higher volume of automotive loans than in the past, we should pay close attention to the percentage of delinquent loans compared to the overall market and compare that to previous years. And when we examine findings from our report, the percentage of automotive loans and leases that were 30-days past due dropped from 2.36 percent to 2.32 percent compared to a year ago. When we look at loans and leases that were 60-days past due, the percentages are relatively stable (up slightly from 0.76 percent to 0.78 percent compared to a year ago). It’s worth noting, these percentages are well below the high-water mark set during Q4 2009 when 3.30 percent of loans were 30-days delinquent and 0.94 percent of loans were 60-days delinquent. But, while the rate of delinquency is down and/or relatively stable year-over-year, it has trended upward since Q4 2015 – we’ll want to stay close to these trends. That said, much of the increase in the percentage of 60-day delinquent automotive loans is a result of a higher percentage of deep subprime loans from previous years – high-risk originations that become delinquent often occur more than 16 months after the origination. Additionally, the percentage of deep subprime originations has steadily decreased over the past two years, which could lead to a positive impact on the percentage of delinquent automotive loans. Despite rising automotive loan amounts and monthly payments, the data shows consumers appear to be making their payments on-time – an encouraging sign for automotive lenders. That said, lenders will want to continue to keep a close eye on all facets of car buyers’ payment performance moving forward – but it is important to put it into context. A clear understanding of these trends will better position lenders to make the right decisions when analyzing risk and provide consumers with comprehensive automotive financing options. To learn more about the State of the Automotive Finance Market report, or to watch the webinar, click here.
Vehicle prices are going up, yet consumers seem unfazed. Despite consumers taking out larger loan amounts, they continue to make their monthly payments on time. But, affordability remains a point of industry interest. As vehicle prices hit record highs, how long will consumers have an appetite for them? According to Experian’s latest State of Automotive Finance Market report, delinquency rates continued a downward trend, as 30- and 60-day delinquencies were 2.11 and 0.64 percent, respectively, at the end of Q2. Those numbers demonstrate that car owners are making timely payments despite rising vehicle costs, which is an encouraging sign for the market. The average loan amount for a new vehicle is now $30,958, a $724 increase from last year. Additionally, consumers are now making monthly payments of about $525 on a new car loan, an all-time high that has seen a $20 year over year increase. The auto market shows little to no sign of declining costs, but vehicles aren’t the only cost to consider – interest rates have increased by 56 basis points since last year. When combined with the rising manufacturer costs, long-term affordability is a continued concern within the industry. The data points to consumers offsetting the expense by taking out longer loan terms. In Q2, the most common loan length was 72 months—which equates to six years—for both new and used financing. While this lowers the monthly payment, it leaves them subject to paying higher interest over time, as well as the potential for individuals to be upside down on their loan for a longer period of time. The key takeaway from this data is that costs continue to rise, but consumers appear to be doing a better job of managing their finances. This insight can help OEMs, dealers, and lenders make strategic decisions with a better understanding of consumer borrowing and credit habits, and think about how to make car ownership more inviting, through incentive or loyalty programs. For consumers, continuing to take steps to actively improve your credit score is one of the key ways to ensure that you’re able to negotiate the right deal when it comes to financing. Ultimately, for everyone involved, it comes down to leveraging the power of data to make more informed decisions, which can help make vehicle ownership more accessible and affordable. To learn more about the State of the Automotive Finance Market report, or to watch the webinar, click here.
The economy remains steady, maintaining a positive outlook even though the GDP growth slowed in the first quarter. Real estate is holding ground even as rates rise. We’ve reached a 7-year high in 30-year fixed-rate mortgages, which could have a longer-term effect on this market. Bankcard may be reaching its limit — outstanding balances hit $764 billion and delinquency rates continue to rise. While auto originations were flat in Q1, performance is improving as focus moves away from subprime lending. The economy remains steady as we transition from 2017. Keep an eye on inflation and interest rates in regard to their possible short-term economic impact. Learn more about these and other economic trends with the on-demand recording of the webinar. Watch now
Auto originations continue to increase — particularly within prime categories. According to Experian’s latest State of the Automotive Finance Market report: Prime consumers grabbed the lion’s share of the total finance market, at 40.9%. Super-prime buyers showed the largest increase, reaching 20.2%. Consumers outside the prime category (credit score of 600 or lower) decreased to the lowest share on record since 2012. Credit unions and captive lenders increased market share of total vehicle financing, growing to 21% and 29.8% — an increase of 6.9% and 35.1%, respectively. As auto loan originations continue their upward trend, lenders can stay ahead of the competition by using advanced analytics to target the right customers and increase profitability.
Setting new records isn’t just for racecar drivers. The auto finance industry continues to achieve its own new highs. According to Experian’s State of the Automotive Finance Market report, the average amount financed for a new vehicle in Q4 2016 was $30,261 — up $710 from Q4 2015 and the highest amount on record. The report also shows that the number of consumers opting for auto loans with longer terms (73 to 84 months) increased from 29% in Q4 2015 to 32.1% in Q4 2016. These findings underscore the importance of closely monitoring consumer credit trends to stay competitive, meet consumer demands and set your own new records. Webinar: Latest consumer credit trends>
A recent Experian study found that the amount of time it’s taking for automotive loans opened in Q4 2015 to become delinquent is actually similar to the pace in 2008. When looking at the 60+ DPD rate across all risk levels, the delinquency rate for accounts opened in Q4 2015 reached 0.50% within 6 months, compared with 0.51% for accounts opened in Q4 2008. Lenders can design more effective strategies by using analytics to gain insight into the latest trends and target the right customers. Video: Auto Acquisition Strategies>
Leasing continued its strong growth as the share of new vehicles leased jumped from 26.9% in Q2 2015 to a record high of 31.4% in Q2 2016. As vehicle prices continue to rise, used vehicle loans also set new records. The average used vehicle loan reached an all-time high of $19,101 in Q2 2016, up from $18,671 in Q2 2015. Used vehicle loans accounted for 55.6% of all vehicle loans in Q2 2016. Want to capitalize on this growth? Analytics can help you target borrowers who are creditworthy and in the market for an auto loan or lease. >>Video: Auto Acquisition Strategies
According to the most recent State of the Automotive Finance Market report, the total balance of open automotive loans increased 11.1% in Q1 2016, reaching $1.005 trillion — up from $905 billion in Q1 2015. This is the first time on record that automotive loans have passed the $1 trillion mark. The report also revealed that subprime loan volumes experienced double-digit growth and overall delinquencies remained low. With more consumers relying on financing, lenders should monitor credit and delinquency trends in order to adjust strategies accordingly. >>Webinar: Hear about the latest consumer credit trends
As new vehicle prices continue to rise, more consumers are turning to leasing as a cost-effective auto financing option. Findings from the most recent State of the Automotive Finance Market report show that the average lease payment for Q4 2015 was $412 (versus the average loan payment of $493). Not surprisingly, due to the fact that most consumers tend to finance vehicles based on monthly prices, leasing reached a record high, accounting for 33.6% of all new financing during the quarter. Lenders can design more effective strategies by using analytics to gain insight into the latest trends and to target the right customers for automotive leases and loans. >> Video: Auto Acquisition Strategies
According to Experian’s latest State of the Automotive Finance Market report, auto loan balances reached an all-time high of $987 billion in Q4 2015 — an increase of 11.5% over Q4 2014.
According to the latest State of the Automotive Finance Market report, consumers are continuing to extend loan terms as a way to keep payments low.
While auto delinquencies declined slightly year over year (3.01% for accounts 30 days past due or greater in Q2 2015 versus 3.03% a year earlier), it is interesting to note the variance in delinquency by lender channel.
According to Experian’s latest State of the Automotive Finance Market report, auto loan balances reached an all-time high of $905 billion in the first quarter of 2015.
Auto loan originations reached $153 billion in Q2 2014, which was a 16 percent increase over the same quarter last year. While the largest contribution came from captive auto lenders at $47 billion (a 14 percent increase), credit unions experienced the largest year-over-year increase of 35 percent, with originations reaching $37 billion in the latest quarter. As auto loan originations continue to grow, lenders can stay ahead of the competition by using advanced analytics to target the right customers and increase profitability. Learn how your automotive portfolio compares through the peer-benchmarking capabilities of IntelliViewSM, and view sample reports by industry. Source: Access the latest credit trends with Experian's IntelliView.
While automotive loan originations grew 15 percent year over year in Q1 2014, a recent Experian Automotive study found that more consumers are continuing to drive older-model vehicles.