Experian Finance Report Shows Positive Trends

By Staff Writer December 04, 2020


According to findings from Experian’s Q3 2020 State of the Automotive Finance Market report, the automotive sector continues to show positive trends.

Prior to the pandemic, delinquency rates were considered a barometer of health for the automotive finance market, and this continues to be true today. According to the report, 30- and 60-day delinquency rates improved in Q3 2020, reaching 1.56 percent and 0.51 percent, respectively. Comparatively, a year ago, the 30-day delinquency rate was 2.25 percent and the 60-day delinquency rate was 0.75 percent.

“Some consumers likely leveraged financial assistance programs to manage through hardship, so it’s important for lenders to keep a close eye on how delinquency rates evolve over the coming quarters. Nonetheless, the improvement is a positive sign for the country’s economic recovery,” said Melinda Zabritski, Experian’s senior director of automotive financial solution..”

Buyers are Shifting to Used Cars
Buyers are Shifting to Used Cars

With fewer incentives offered in Q3 2020, a higher percentage of prime borrowers shifted back to used. Prime and super prime borrowers made up 55.3 percent of used vehicles financed during the quarter, a new high for used vehicle lending. Thirty- and 60-day delinquency rates improve in Q3 2020, as the automotive industry continues to rebound. The shift back to the used vehicle market is likely driven by continued affordability conversations. Both the average new and used vehicle loan amounts saw increases in Q3 2020. The increases in new and used loan amounts could also be attributed to consumer preference, with consumers leaning toward larger, more expensive vehicles.

The average new vehicle payment increased $11 year-over-year, reaching $563 in Q3 2020, and the average used vehicle payment increased $6 to $397, over the same period. The smaller uptick in the average monthly payment is due to an increase in loan terms and lower interest rates. The average loan term for a new vehicle increased slightly to 69.68 months in Q3 2020, up from 68.98 months, while the average loan term for used vehicles increased from 64.49 months to 65.15 months. The average interest rate for a new vehicle loan saw a sharp decrease from 5.38 percent in Q3 2019 to 4.22 percent in Q3 2020, while the average interest rate for a used vehicle dropped from 9.09 percent to 8.43 percent over the same period.

Deep subprime loans remained under 3 percent in Q3 2020, with overall subprime lending at a record low of 19.23 percent.

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Last modified on Tuesday, 08 December 2020 17:22