Vehicle Average Loan, Monthly Payment at Record Highs

Predicting the trend of U.S. light vehicle sales is based on many factors and unknowns. What is known, however, is that the rise in loan amounts, monthly payments and interest rates for new vehicles are at record highs.  According to Experian’s State of the Automotive Finance Market Report released today, the average new vehicle loan was $31,455 in Q1 2018, an increase of $921 from the previous year. The monthly payment for a new vehicle climbed to $523, a $15 increase over the same period. The average interest rate for a new vehicle was 5.17% during the quarter.

Forecasts for U.S.  vehicle sales predict flat May numbers year-over-year when they are released tomorrow. New light-vehicle sales are projected to reach 1.56 million units, with a seasonally adjusted annual rate – SAAR – of 16.6 million, down a tad from last year. If accurate the SAAR will be its lowest level since August 2017 and down from the 17.1 million trend the market has been averaging in 2018.  (Read AutoInformed.com on U.S. Vehicle Sales Forecast Flat for May 2018)

The Experian report also says that loan terms for new vehicles have also increased during the quarter (slightly above 69 months). While 72-month loans remain the most common loan term, more new loans are in the 85- to 96-month range.

“The dream of owning a new vehicle is becoming more elusive to the average American,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions.”

The population segments hurt most are subprime and deep subprime consumers. The percentage of new vehicle loans to subprime and deep subprime consumers has decreased 8.4% and 14.1%, respectively. The percentage of new vehicle loans to prime and super prime consumers has reached 73.4%, the highest Q1 level since 2012. Experian says it’s a sign that some lenders have become more risk-averse.

Delinquencies Down

Some lenders have reduced loans to riskier borrowers, but the overall automotive loan market shows signs of improvement. The percentage of 30-day delinquencies have dropped 3.1% to 1.90% in Q1 2018, while 60-day delinquencies are flat at 0.67%.

“Traditionally, lenders’ risk tolerance has swung back and forth like a pendulum, and right now we’re seeing a more risk-averse side. But if payments continue to improve, we could see credit standards loosen,” Zabritski claims.

Other Trends

  • Outstanding loan balances reached a record high of $1.108 trillion
  • Credit unions continue to see the highest growth in automotive loan market share, reaching 21.3%, a 6.9% increase from a year ago
  • The average credit score for a new vehicle loan rose to 716 in Q1 2018, while the average credit score for a used vehicle loan rose to 655 during the same period
  • Loans for used vehicles reached $19,536 in Q1 2018, a new record high.

 

About Kenneth Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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