A dip in subprime lending and delinquencies continued to climb according to the Experian State of Automotive Finance Market released earlier this year. The report, covering Q4 2023 also showed that the average LTV (loan-to-value) slid year-over-year for both used and new. The percentage of used vehicles financed dipped year over year to under 38% from more than 41%.

Under the Experian report, more than 33% of used loans were for buy-here, pay-here and “other” – the biggest share of used financing. More than 27% of used loans came from finance companies and nearly 23% of used loans were from credit union sources, Just under 16% of used loans came from traditional banks. Looking at used loans by state, Wyoming had the largest percentage of used vehicle loans at 83.7%, while New York had the smallest percentage of used vehicle loans 63.1%.

Subprime and deep subprime loans made up less than 22% of all used loans compared to 43% of prime and more than 14% super prime. The average used amount financed in 2023 fell to $26,685 over $1,200 less than the prior year. The average interest rates have continued to rise for used vehicle loans over the past three years. In 2021, the average loan rate was 8.2% and then jumped to 10.36%, while nearly hitting 12% in 2023. The average used monthly payment hit $532 in 2023, only a couple of of dollars higher than the prior year. The average used loan term actually fell slightly in 2023 to 67.4 months, from 67.4 in 2022.

The Experian report showed that used vehicle loan amounts financed fell across all loan risk segments with prime hitting $28,074 while subprime fell under $30,000. Prime saw the biggest dip in used loan amount – $1,479. The average used monthly payment by risk segment was $548 in the subprime category – the highest mount – to $526 for prime loans. Delinquencies continued to climb with 2.31% of auto loans 30-days delinquent and nearly 1% delinquent 60 days.

Average LTVs for used vehicles fell to 118.71% in Q4 from over 123% the prior year. Subprime and deep subprime loans saw higher loan terms at 66.25 months for subprime and 63.07 for deep subprime. Those risk segments also saw higher loan rates, with nearly 19% for subprime loans and over 21$ for deep subprime loans.

Overall loan balances (in billions) grew 4% year over year with biggest growth in the super prime and subprime segments.

On the new-car side, captives’ share of loans continued to climb to more than 61% while credit unions’ share fell to 12% and bank loans made up more than 20% of new-car loan market share. SUVs and wagons made up nearly 63% of new-financing by segment, followed by sedans at 16.58% and pickups at 15.19%. 

Electric vehicles (EVs) made up 8.55% of new retail by fuel type, compared to nearly 76% for gasoline and just under 10% for gasoline/hybrid vehicles. More than 30% of EVZs being financed weer4e by lease. Nearly 49% were purchased through traditional loans.