Consumers Relying on Financing, Experian Reports
SCHAUMBURG, Ill. —Consumers are relying on financing more than ever to buy their next vehicle, according to Experian Automotive. The firm’s latest State of the Automotive Finance Market report shows that the percentage of new vehicles purchased with financing in the fourth quarter of 2014 increased over the previous year to reach 84%. Used vehicles that were financed reached a record high of 55.2%.
Furthermore, the study shows that the average loan amount for a new vehicle in the fourth quarter of 2014 once again hit its highest level on record, reaching $28,381. This represents a more than $950 increase from a year ago and a $582 increase from the previous quarter. For used vehicles, the average loan amount increased $437 from last year to reach $18,411.
“In most parts of the country, vehicles are viewed as a necessity to everyday life, which is why we continue to see consumers willing to take out larger loans as the average price of vehicles continues to rise,” said Melinda Zabritski, Experian’s senior director of automotive finance. “As more consumers lean on financing, it’s important for them to consider all of the factors involved, including monthly payments, interest rates and loan terms. These insights will enable them to have a better understanding of their potential payment obligation and take the appropriate action in order to make the vehicle fit within their monthly budget and more easily meet payment terms throughout the life of the loan.”
Findings from the report also show that leasing continued to gain traction, as it jumped 3.6% from a year ago to reach nearly 30% of all new vehicles financed in the quarter.
In addition to the number of leases increasing in the quarter, the study shows that it was slightly more affordable and easier to obtain one. The average monthly lease payment decreased $12 from a year ago to reach $408 in Q4 2014. What’s more, the average new-vehicle lessee had an average credit score of 717 in Q4 2014, down two points over the same time period.
The study also found that the average credit score for a new-vehicle loan dropped 3 points in Q4 2014 to reach 712, and the average credit score for a used vehicle loan increased 2 points in the quarter to reach 648. Also in the fourth quarter, the average monthly payment for a new vehicle hit $482 — its highest level on record.
Interest rates for new-vehicle loans crept up in Q4 2014 to 4.56% and loan terms for new and used vehicles increased from a year ago to reach 66 months and 62 months, respectively. Captives were the only lender type to see an increase in market share year over year.
Experian’s quarterly State of the Automotive Finance Market report leverages information from its AutoCount database, which enables insights into the automotive-lending market by geography, credit score and vehicle registrations, among other factors.
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