Captives took back the majority of total vehicle financing in the second quarter, outpacing banks and credit unions, according to Experian’s State of the Automotive Finance Market Report: Q2 2023.

The report found captives comprised 29.05% of the total vehicle financing market in the U.S., up from 22.15% a year earlier. They were followed by:

• Banks (24.84%)

• Credit unions (22.49%)

• Finance companies (13.09%)

• BHPH/others (10.52%)

The trend was more pronounced with new vehicles, captives capturing 58.47% of new-vehicle financing, up from 46.80% year-over-year, followed by:

• Banks (22.25%)

• Credit unions (13.70%)

• Finance companies (4.45%)

• BHPH/others (1.13%)

“With more incentives in the market and consumers leaning back into new vehicles, naturally we’d expect captive lenders to take back market share,” said, Melinda Zabritski, Experian’s senior director of automotive financial solutions, in a press release. “Based on current market conditions, maintaining a close eye on consumers’ buying preferences, such as loan terms and preferred makes and models, lenders and dealers can help consumers find vehicles that fit within their budgets.”

Amid rising interest rates, consumers are continuing to opt for shorter term loans, Experian reported.

The segment for shorter-term loans for new vehicles showed significant growth year-over-year, moving from 9.53% to 14.58% in the one- to 48-month range. Used-vehicle loans with one- to 48-month terms accounted for 11.31% of all loans, up from 10.06% a year earlier

Shorter-term loans pushed the average monthly payment of new and used vehicles to  $729, up from $672 year-over-year. The monthly payment for a preowned car also increased slightly from $519 in the previous year to $528.

Experian reported that the average interest rate for a new vehicle increased to 6.63%, from 4.60%. Used-vehicle interest rates followed a similar trend, increasing to 11.38% from 8.84%.

Experian data also showed leasing experienced a slight uptick to 21.29% from 19.92%.

Further analysis of the data shows that the Tesla Model 3 (1.79%) made history by becoming the first electric vehicle to feature in the top 10 leased models.

Experian also reported that:

• The U.S. vehicle loan balance grew by 6.5% year-over-year, hitting $1.45 trillion.

• The prime and super-prime markets grew to over 67% of total financing, with prime at 45.58% and super prime at 21.77%.

• The average new-vehicle loan amount rose by $70 year-over-year, hitting $40,657. The typical loan amount for a preowned vehicle dropped by $1,744 to $26,863.

• 30-day delinquencies reached 2.28%, while 60-day delinquencies hit 0.82%.