Experian Automotive Reports on Fourth Quarter Auto Finance Trends

Exper­ian Auto­mo­tive has released its lat­est report on the auto finance mar­ket, and it was a very quar­ter. The fourth quar­ter 2015 study digs into the lat­est updates in out­stand­ing loan bal­ances, risk dis­tri­b­u­tion, delin­quen­cy rates, and financ­ing trends.

Here are some of the high­lights from the report:

  • Leas­ing: As antic­i­pat­ed, vehi­cle leas­ing is con­tin­u­ing to grow. Leas­ing is reach­ing all-time highs of all new con­sumer trans­ac­tions, accord­ing to the State of the Auto­mo­tive Finance Mar­ket report. Leas­ing made up 28.87% of all new vehi­cle financ­ing in the fourth quar­ter.
  • High-risk: More leas­ing is going to the non­prime and sub­prime con­sumer seg­ments since one year ear­li­er. High-risk loans have also seen an increase. Exper­ian calls it “mod­est high risk growth for new financ­ing.”
  • Length­en­ing loans: Loans are con­tin­u­ing to get longer, with 84 months becom­ing the cap, accord­ing to Exper­ian. Loans last­ing six to sev­en years made up near­ly 30% of new-vehi­cle loans dur­ing the fourth quar­ter.
  • Share by loan length: New-vehi­cle loans of 61 to 72 months made up the largest share in the fourth quar­ter at 42%, with six to sev­en years tak­ing sec­ond place. Loan terms of 73 to 84 months made up 29% of new-vehi­cle loans in Q4, a 12% increase over the fourth quar­ter of 2014.
  • Low pay­ments: Keep­ing month­ly pay­ments low con­tin­ues to be pop­u­lar. Some deal­ers are encour­ag­ing con­sumers to put down larg­er down pay­ments to reduce month­ly pay­ments, but that does car­ry to risk of los­ing some of those sales.
  • Loan bal­ances: Out­stand­ing auto­mo­tive loan bal­ances reached all-time high.
  • Used vehi­cle loans: The per­cent­age of used vehi­cles with loans has dropped dra­mat­i­cal­ly over the past 25 years – from over 90% in 1990 to 20% in 2015. Some of that trend has been caused by used vehi­cle life increas­ing quite a lot in recent years to about 11.5 years for all cars on U.S. roads last year ver­sus about 7.6 years aver­age age in 1990. An inter­est­ing fact about loans is that 62.8% of them were for used cars in the fourth quar­ter.
  • Delin­quent loans: Watch out for delin­quent loans as used vehi­cle val­ues drop. Trade-ins with a low­er val­ue will hurt con­sumers and lenders. For exam­ple, if a con­sumer with a sev­en-year loan were to trade in before term end, say, at five years, the con­sumer would be upside down, and if the loan became delin­quent, there would be a greater loss to the lender, said Melin­da Zabrit­s­ki, Exper­ian Automotive’s senior direc­tor of finan­cial solu­tions.
  • Top 5 banks: For the top lenders in the used vehi­cle retail mar­ket, the top five in Q4 were (in numer­i­cal order: Wells Far­go DS; Ally; Cap­i­tal One; Chase; and San­tander.


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