While affordability concerns have remained top of mind over the past few years, the third quarter of 2023 showed positive signs for consumers in the market for a vehicle.
According to Experian’s State of the Automotive Finance Market Report: Q3 2023, the average new vehicle loan amount decreased to $40,184, from $41,543 in Q3 2022 and the average used vehicle loan amount went from $28,684 to $27,167 year-over-year.
This is an indicator that the market is continuing to stabilize, considering from Q3 2021 to Q3 2022 new vehicle loan amounts increased $3,698 and used vehicle loan amounts increased $2,379.
Despite average loan amounts declining, data shows average monthly payments experienced a slight increase—potentially due to the rise in interest rates. For instance, the average monthly payment for a new vehicle came in at $726 in Q3 2023, from $701 last year and the average monthly payment for a used vehicle went up $4 year-over-year, reaching $533 this quarter.
Additionally, the average interest rate for a new vehicle went from 5.26% in Q3 2022 to 7.03% in Q3 2023 and the average rate for a used vehicle increased from 9.38% to 11.35% in the same time frame.
Consumers continue to choose shorter-term loans for new vehicles
As a result of higher interest rates, consumers continued opting for shorter-term loans in the third quarter of 2023, particularly for new vehicles.
In Q3 2023, new vehicles with up to 48-month loan terms increased to 13.40%, from 9.99% in Q3 2022. Additionally, new vehicle loans with 49- to 60-month terms went from 16.50% to 17.16% year-over-year and new vehicle loans with 61- to 72-month terms reached 38.65% this quarter, from 36.67% last year. On the contrary, new vehicle loans with 73- to 84-month terms decreased from 35.11% in Q3 2022 to 29.15% this quarter.
It’s notable that loans up to 48 months offered an average interest rate of 4.03% in Q3 2023, while the average rate for 49- to 60-months was 5.67%, followed by 61- to 72-months at 7.24%, 73- to 84-months at 8.80%, and 85+ months at 8.81%.
To learn more about automotive finance trends, view the full State of the Automotive Finance Market: Q3 2023 presentation on demand.
