Balanced loan portfolios, timely customer payments and stable automotive lending market quash subprime bubble fears
Leasing and used vehicle sales continue to break records
SCHAUMBURG, Ill., Sept. 6, 2016 /PRNewswire/ -- Fear of an impending automotive subprime bubble has been swirling around the industry since the recovery from the Great Recession. According to Experian's latest State of the Automotive Finance Market report, announced today, those fears haven't come to fruition, and the automotive credit market has continued to show steady growth and remarkable stability quarter over quarter.
Findings from the Q2 2016 report show that while both 30- and 60-day loan delinquencies were up slightly, the combined subprime and deep-subprime share of new and used auto loans and leases dropped from 23.3 percent in Q2 2015 to 22.8 percent in Q2 2016. Overall, automotive lenders made more than five times as many loans to super-prime customers (17.9 percent of total auto loans and leases) as to deep-subprime customers (3.5 percent of total auto loans and leases).
"Automotive lenders seem to be keeping cool heads when it comes to how much risk they are willing to take with subprime and deep-subprime customers," said Melinda Zabritski, senior director of automotive finance for Experian. "Yes, subprime and deep-subprime loans are growing, but the entire market is growing from a volume perspective across all risk tiers. In fact, the subprime loans have actually dropped as a percentage of the total market. That, combined with only a slight uptick in delinquencies, makes clear that the sky is not falling."
Thirty-day delinquencies were up from 2.19 percent in Q2 2015 to 2.22 percent in Q2 2016, while 60-day delinquencies moved from 0.56 percent to 0.62 percent in the same time period.
Leasing, used vehicle sales continue to gain momentum
Leasing continued its strong growth as the share of new vehicles leased jumped from 26.92 percent in Q2 2015 to a record-high of 31.44 percent in Q2 2016. Even used vehicle leasing, which accounts for a small slice of the lease market, experienced growth, moving from 3.26 percent share in Q2 2015 to 3.71 percent in Q2 2016.
Used vehicle loans also grew to record heights in terms of average dollar amount and overall loan share during the quarter. The average used vehicle loan reached an all-time high of $19,101 in Q2 2016, up from $18,671 in Q2 2016. Used vehicle loans also reached a new peak, accounting for 55.61 percent of all vehicle loans during Q2 2016.
The growth was driven by jumps in prime and super-prime consumers choosing used vehicles. Specifically, 43.3 percent of super-prime consumers selected a used vehicle, which represents a 10 percent increase over 2015. For prime consumers, 59.9 percent chose used, a 6.6 percent increase over the previous year. This shift also helped push the average credit score for a used vehicle loan from 645 in Q2 2015 to 648 in Q2 2016.
"One of the biggest trends we continue to see is the shift to used vehicles by customers with excellent credit," Zabritski said. "As vehicle prices continue to rise, savvy consumers are looking for ways to control costs. That appears to be pushing more customers toward used vehicles."
Other Q2 2016 findings:
- The average monthly payment for a used vehicle was $364, up from $361 in Q2 2015
- The average monthly payment for a new vehicle loan was $499, up from $483 in Q2 2015
- The average new vehicle loan amount was $29,880, up $1,356 from the Q2 2015 average new vehicle loan amount of $28,524
- Average customer credit scores for new vehicle loans fell slightly, from 709 in Q2 2015 to 708
- The average loan term for a new vehicle went from 67 months in Q2 2015 to 68 months
To view the recorded webinar for more information regarding this quarter's analysis go to www.experian.com/automotive, or to purchase historical information from Experian Automotive's other research, visit www.experian.com/automotive/autostore.html.
About Experian Automotive
Experian Automotive provides information services and market intelligence that enables results-driven professionals to gain the fullest possible understanding of the market, the vehicles and the people who buy them. Its North American Vehicle DatabaseSM houses data on nearly 700 million vehicles and, when combined with Experian's credit, consumer and business information, provides an integrated perspective into the automotive marketplace. Experian Automotive's AutoCheck® vehicle history reports provide dealers and consumers with in-depth information, allowing them to confidently understand, compare and select the right vehicles. For more information on Experian Automotive and its suite of services, visit our website at http://www.experian.com/automotive.
We are the leading global information services company, providing data and analytical tools to our clients around the world. We help businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. We also help people to check their credit report and credit score and protect against identity theft. In 2015, we were named one of the "World's Most Innovative Companies" by Forbes magazine.
We employ approximately 17,000 people in 37 countries and our corporate headquarters are in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2016, was US$4.6 billion.
Experian and the Experian marks used herein are trademarks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the property of their respective owners.
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