Experian Automotive yesterday announced that a record 84.5 percent of consumers who acquired a new vehicle in the second quarter obtained either a loan or a lease to fund the purchase. According to the latest State of the Automotive Finance Market report, new vehicle financing is at the highest level since tracking began in 2006. This metric is up from 82.5 percent in Q2 2012 and from 79.7 percent prior to the recession in Q2 2008.
Mike Kloiber, president and CEO of Oklahoma City-based Tinker FCU, says they’ve seen a significant increase in auto loans – new and pre-owned.
“Due to the economy, a lot of people have held off on new auto purchases, choosing instead to drive their vehicles longer,” suspects Kloiber. “Now I think people have either gotten used to the economic uncertainty or are feeling more confident about the future, so they’re trading in their old cars for a newer model.”
The low-rate environment, he says, is helping to make the auto purchase more affordable for a lot of consumers.
“For some consumers that have held onto their late model vehicles, current interest rates have made it more desirable to purchase another vehicle rather than getting into costly repairs,” he adds.
Kloiber says for the past 20 years, the credit union has had as a very successful indirect loan program, which has contributed greatly to its auto loan growth.
Findings from the Experian report showed that of all new vehicles financed, leases accounted for an all-time high of 27.64 percent during the second quarter, up from 24.4 percent in Q2 2012. Additionally, the report highlighted the differences in financing attributes, such as average monthly payment, credit score and financing term. For example, the average monthly lease payment was $408, compared with $457 on a new vehicle loan.
Nonprime, subprime and deep-subprime new vehicle loans increased to 27.45 percent market share in Q2 2013, up from 25.41 percent in Q2 2012. For used vehicles, nonprime, subprime and deep-subprime loans accounted for 57.31 percent market share in Q2 2013, up from 56.46 percent in Q2 2012.
In other Q2 2013 findings:
• The average amount financed was $26,526 for a new vehicle and $17,913 for used
• The average interest rate was 4.46 percent on a new vehicle loan and 8.56 percent for used
• The average loan term was 65 months for a new vehicle and 61 months for used
• The average monthly payment was $457 on a new vehicle and $351 for used