Credit Union Releases Update on Auto Loan Market for Q2 2018

Inside Subprime: Oct 3, 2018

By Aubrey Sitler Frankel

Most Americans who buy vehicles rely on some kind of financing, such as a loan, to make the purchase. Earlier this year, Experian presented their quarterly State of the Automotive Finance Market, which looks at auto loans and leases in the 2nd quarter of 2018.

This report presents a bunch of interesting and relevant findings about how the loan consumers use to buy vehicles have been fluctuating, as well as how folks who’ve financed vehicle purchases have done so.

This is notable because a look into the auto loan market – including how much people are paying for cars and how they’re affording to pay the amounts they are – can tell us a lot about where we are economically, especially in a country where many people require a vehicle to remain employed, support their families, and maintain their own health and wellbeing.

According to the report, in the second quarter of 2018, just over 86% of new vehicles were purchased with financing, as were almost 55% of used vehicles. These proportions are comparable to the second quarter of 2017, but they have gone up slightly.

On average, people took out $30,958 in loans to purchase cars during this period, which marks a $724 or 2.4% increase compared to the same period last year. The report breaks this number down by new vs. used vehicles, as well as by lending tier – that is, by the credit score ranges that communicate to lenders whether someone is an ideal borrower or not. Across all lending tiers, borrowers took out an average of $19,708 to purchase a used vehicle. Borrowers in the lowest lending tier (i.e., those with the lowest credit scores) took out an average of $25,368 in loans for new cars (a 3.5% or $881 increase from this period last year) and $16,974 in loans to purchase used cars (a 3.4% or $498 increase from this period last year). The report states that this quarter marks a record high average loan amount for used vehicles.

On top of that, it appears that monthly payments on both new and used cars hit all-time highs in the 2nd quarter of this year. Across all risk tiers, folks are paying an average of $525 on new cars that are financed through loans. That’s a 4% increase from this time last year. Broken down a little more, people in the super prime tier (i.e., those with the highest credit scores) are paying the least with an average of $498 monthly, while those in the nonprime tier (i.e., those with credit scores between 601-660) are paying the most with an average of $543 per month. For used cars, the total average monthly payment is $378 (a $13 or 3.6% increase from this period last year), with the deep subprime tier (i.e., folks with credit scores between 300-500) paying the most with an average monthly loan payment of $395 (a $13 or 3.4% increase from this period last year).

Complementing this report on loans and financing are analyses from Kelley Blue Book on how much new vehicles cost (regardless of whether they’re financed or not) for the same quarter. According to Kelley Blue Book’s experts, the average transaction price (ATP) for light vehicles (i.e., passenger vehicles ranging in size from compact cars to a full-sized van) was $35,285 at the end of March 2018 – a 2% increase from March 2017.

For more information on both sets of statistics and general trends in auto costs and financing, check out Experian’s video presentation of this report, as well as Kelley Blue Book’s quarterly auto market reports and general press releases.

For information on predatory title and payday loans check out all of our state-by-state Subprime Reports.

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