It’s that time again—time to breakdown the latest State of the Automotive Finance Market1 report by Experian. Overall, the auto lending market was strong as 2019 came to a close. Total open loan balances reached $1.22 billion at the end of Q4, with the majority of lenders portfolios remaining deep subprime and prime.
Stable delinquency trends bode well for consumers and lenders alike. Credit Unions saw their 30-day delinquency rates remain at 1.28% year-over-year, while banks and finance companies saw a 0.06% and 0.19% decrease, respectively.
Used lending remains strong
Consumers continue to gravitate toward used vehicles. In fact, used prime lending surpassed 50%, a Q4 high since 2009. Credit Unions, specifically, held 26.74% of the used financing market share. Consistent with previous years, deep subprime and subprime borrowers chose used auto loans in Q4, 91.11%, and 81.29%, respectively.
Monthly payments continue to rise
As I mentioned in my last post, average loan amounts and monthly payments continue to rise. Average new lease payments reached $461 per month with a 36.67-month lease term in Q4. Total loan amounts vary by risk tier; however, average loan amounts were $32,797 and $20,554 for new and used loans, respectively.
Loan terms reach record highs
Longer loan terms continue to dominate the market. Loan terms on new loans reached 69.26 months, while used car loans sat right at 64.96 months. Year-over-year, this was a 0.53% change.
In summary, delinquency trends remain stable, although consumer confidence is wavering with fears about the Coronavirus (COVID-19) and the gyrations in the stock market. Look for captive finance companies to launch a new round of incentives in an effort to create demand and move inventory. It should be an eventful year, so, buckle up because it may get rocky.