Auto Loan and Lease Balances Top $1 Trillion, Equifax Reports
ATLANTA — Equifax reported this week that the total amount of outstanding balances on automotive loans and leases has crossed the $1 trillion mark, with finance companies leading the way.
As of June 2015, total outstanding balances on auto loans and leases reached $1.021 trillion, a year-over-year increase of 10.5%. Additionally, the number of outstanding accounts has increased 8% from a year ago to 73.7 million.
“Strong sales numbers in both the new-car and used-car markets, coupled with the availability of quality financing for consumers are a few of the main reasons the industry has reached the one trillion-dollar mark,” said Dennis Carlson, deputy chief economist at Equifax. “It clearly reflects that the improving economy has provided the impetus for consumers to replace their aging vehicles and begin to satisfy their pent-up auto demand.”
While auto loan balances through June 2015 are growing at relatively similar rates for both banks and finance companies (10.1% and 10.2% year over year, respectively), the latter is considerably outpacing the former in auto leasing. According to Equifax, finance company lease portfolios are more than seven times the size of bank lease portfolios. Finance companies are also growing originations faster than banks, with 54.2% of all new auto accounts and 51.8% of dollar originations through April 2015 flowing through the segment.
“The captive auto finance companies are supporting sales for the manufacturers, and dealers continue to work with independent auto finance companies to find the right loans for their customers, particularly in the non-prime space,” Carlson noted. “This combination has led to finance companies growing slightly faster than the commercial bank segment.”
According to Equifax, more than nine million auto loans, totaling $182.9 billion, were originated through April 2015. This is a 5.8% increase in accounts and an 8% rise in balances compared to the same time last year. These are the highest levels for this time period since Equifax began tracking this data.
Additionally, 2.12 million auto loans to consumers with an Equifax Risk Score below 620, generally considered subprime accounts, were originated through April 2015, a 9.6% increase over last year. Additionally, loans made to customers with subprime credit accounted for 23.5% of all auto loans through April, up slightly from 22.7% one year ago.
The average loan amount, according to Equifax, was $20,800 through April, a 3.65% increase over April 2014. Additionally, the average amount financed for a subprime loan increased 3.74% to $18,200.
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