F&I and Showroom, January 2018

www fi magazine com 24 F I and Showroom January 2018 AUTO FINANCE es combined were up slightly from the year ago period For 30 day delinquencies the rate increased from 238 in the year ago period to 239 while the 60 day delinquency rate inched up from 075 to 076 Even finance companies which typically cater to credit challenged consumers registered declines in their delinquency rates The segments 30 day rate fell from 458 in the year ago period to 439 while its 60 day rate fell from 178 to 171 LENDERS SHIFT TO HIGHERTIER CONSUMERS The rise in delinquencies albeit slight caused finance sources to turn to the usual countermeasure of tightening credit standards The result was a continued shift toward borrowers with prime and superprime credit In fact prime consumers accounted for the largest share of loans originated during the period which increased from 4035 in the year ago quarter to 409 The superprime risk tier however showed the largest percentage gain rising from 1942 to 2016 of the market Conversely market share for the nonprime subprime and deepsubprime risk tiers all contracted Nonprimes share dropped from 1981 in the year ago quarter to 1956 while subprimes share dropped from 1735 of the market to 166 Deep subprimes share fell from 304 to a record low of 279 Credit scores reflected the contraction of the below prime tiers For newvehicle financing the average score rose from 712 in the year ago period to 713 For used vehicle loans the average score rose from 655 to 659 SHIFT TOWARD PRIME DRIVES DOWN SHARE OF LEASING Even leasing continued to shift toward prime and superprime customers with the average credit score for a new vehicle lease rising from 718 to 722 As a result of that shift the transaction types total share of the finance market fell slightly from 2949 in the year ago quarter to 2914 In the superprime risk tier leasings share grew from 2734 in the yearago quarter to 2916 In the nonprime and subprime tiers combined however leasings share dropped from 2363 to 2207 Even the percentage of consumers choosing to lease dropped in every risk tier as more consumers opted for a loan or paid cash In the superprime and prime tiers the percentage of consumers opting for a lease dropped from 346 in the year ago period to 331 while the percentage of nonprime consumers opting to lease fell from 322 to 294 In the subprime and deepsubprime tiers the percentage dropped from 251 to 224 ANALYTICS CONSUMER BEHAVIOR CONTRIBUTE TO SOLID MARKET For some time now the story in the auto finance industry has focused incorrectly on the rise in subprime lending The data over the last several quarters however points to the entire market growing Yes subprime has grown too but only in proportion to the rest of the market The reality is the market is turning more prime which is an encouraging trend given the rise in average amount financed and stretching loan terms The tightening also demonstrates that finance sources are using data and analytics as part of the lending process Consumers are also taking a more active role in managing their credit before buying a car As long as these trends continue the market should remain in good shape for the foreseeable future ABOUT THE AUTHOR Melinda Zabritski is senior director of automotive credit for Experian Automotive Email her at melinda zabritski@ bobit com