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Experian report shows decline in auto loan amounts amid rising interest rates

Published Nov 30, 2023 01:29PM ET
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Experian’s State of the Automotive Finance Market Report for the third quarter of 2023 shows that average loan amounts for both new and used vehicles have decreased, despite a rise in interest rates. The average loan amount for new cars fell to $40,184, a drop of $3,698 from the previous year, while used car loans saw a decrease of $1,517, averaging $27,167. This comes at a time when interest rates have climbed to 7.03% for new vehicles and 11.35% for used ones.

Notably, the shift in consumer borrowing habits includes a trend towards shorter-term loans. The data indicates a significant increase in the proportion of new vehicle loans with terms of up to 48 months, now accounting for 13.40% of loans. This is a marked rise from last year's figure, which was under 10%. Meanwhile, longer-duration loans spanning 73 to 84 months have seen a decrease by nearly six percent to below 30%, specifically at 29.15%.

Despite the uptick in interest rates, average monthly payments have experienced only modest increases. New vehicle payments now average $726, with an increase of $25 from the previous period, while used vehicle payments sit at $533 with an increment of $4. The overall average loan duration has also seen a slight downturn; it now stands at just under six years (68.26 months) for new vehicles and slightly more than five-and-a-half years (67.57 months) for used ones.

The report also noted that captives have made considerable gains, now holding a majority at 59.18% in the new car finance market, surpassing banks by more than thirty-five percent and credit unions by nearly forty-six percent. The latter still lead the pre-owned segment but with a marginal advantage of just over 30%.

Additionally, the prime lending category has expanded its share, now covering a significant portion (68%) of all auto financing. This suggests a strong credit health among consumers, with manageable delinquency levels. Short-term delinquencies are currently at 2.33%, and long-term delinquencies remain below 1%, specifically at 0.91%.

Melinda Zabritski from Experian (OTC:EXPGF) affirms that despite higher interest rates, the automotive finance industry is showing signs of health with consistent monthly payments across various loan periods.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Experian report shows decline in auto loan amounts amid rising interest rates
 

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