Used Vehicle Finance Market Begins to Level Out, as Used Vehicle Loans See Smaller Year-Over-Year Increases in Q3 2022
December 01 2022 - 8:30AM
Business Wire
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
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Carly Owens Experian Public Relations 1 714 830
5271 carly.owens@experian.com
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