New Experian reports finds average loan terms extend for new and used vehicle loans as interest rates rise

Against the backdrop of the ongoing inventory shortage, the average used vehicle loan amount continues to grow, but at a notably slower rate. According to Experian’s State of the Automotive Finance Market Report: Q3 2022, the average used vehicle loan amount increased 8.59% year-over-year, reaching $28,506. This is significantly smaller than the increase seen this time last year, as in Q3 2021 there was a 21.37% year-over-year increase, reflecting how quickly used vehicle values rose as new vehicle inventory declined. The average loan amount for a new vehicle also saw an increase, growing from $37,753 in Q3 2021 to $41,665 in Q3 2022.

“Since the start of the inventory shortage, used vehicle values rose at a staggering rate, and that appears to be slowing, which is a positive sign for consumers looking to purchase a vehicle,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions. “While average loan amounts and monthly payments are continuing to grow, there are many contributing factors, such as the rise in interest rates. Leveraging data to better understand these factors will help lenders and dealers make informed decisions in the days to come.”

In the third quarter of 2022, the average interest rate was 5.16% for new vehicle loans, and 9.34% for used, up from 4.09% and 8.12%, respectively, last year. The growth in average loan amounts and interest rates were also reflected in average monthly payments, which went from $618 in Q3 2021 to $700 in Q3 2022 for new vehicles, and from $472 to $525 for used vehicles, in the same time frame. The average vehicle loan term also increased, from 69.51 months for new vehicles in Q3 2021, to 69.73 months in Q3 2022. The increase was larger for used vehicles, jumping from 66.97 months in Q3 2021 to 68.08 in Q3 2022.

Finance market share sees shifts

Credit unions held the largest market share of automotive finance in Q3 2022, surpassing banks, which had long been the largest lender in automotive finance. Credit unions held 28.44% of vehicle financing this quarter, a 40% year-over-year increase, as they held 20.21% in Q3 2021. Banks declined in market share, from 32.51% in Q3 2021 to 27.32% in Q3 2022, with similar trends seen for captive lenders, decreasing from 26.64% to 21.89%, year-over-year.

Another shift seen in the finance market is the significant decline in leasing for new vehicles, which dropped from 27.28% in Q3 2021 to 18.01% in Q3 2022. The types of vehicles consumers are looking to lease continues to evolve, with the top 10 models leased comprised of exclusively larger vehicles, such as full-size trucks, and SUVs. Leases often have a lower monthly payment than loans, with the average difference between a loan and lease payment clocking in at $133 in Q3 2022.

“Opting for a lease is one way that consumers look to manage their monthly payments, which is often how they shop for a vehicle,” Zabritski continued. “Affordability will continue to remain top of mind as a decline in leasing, coupled with the lack of new vehicle inventory, will impact availability of used vehicles in a few years.”

Additional findings for Q3 2022:

• Outstanding automotive loan balances increase from $1.2 trillion in Q3 2021 to $1.3 trillion in Q3 2022.
• While most growth was in prime lending (reaching 46.67%), deep subprime financing did increase slightly, from 1.76% in Q3 2021 to 1.85% in Q3 2022.
• Pickup trucks saw an increase in financing, from 15.84% in Q3 2021 to 17.19% in Q3 2022.
• The average credit score for vehicle loans continued to increase, from 733 to 738 year-over-year for new vehicle loans, and from 675 to 678 year-over-year for use vehicle loans.
• Wyoming leads with the largest percentage of loans for used cars in Q3 2022 at 85.4%, while New York has the lowest at 65.5%.

To learn more, watch the entire State of the Automotive Finance Market: Q3 2022 presentation on demand.

About Experian

Experian is the world’s leading global information services company. During life’s big moments – from buying a home or a car, to sending a child to college, to growing a business by connecting with new customers – we empower consumers and our clients to manage their data with confidence. We help individuals to take financial control and access financial services, businesses to make smarter decisions and thrive, lenders to lend more responsibly, and organizations to prevent identity fraud and crime.

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