F&I and Showroom, October 2016

www fi magazine com 24 F I and Showroom October 2016 AUTO FINANCE n Leasing accounted for a record 3144 of all new vehicles financed during the second quarter of 2016 n The average amount financed for a new vehicle loan rose 1356 from a year ago to 29880 while the average amount for used rose 430 to a record 19101 n The average monthly payment for a new vehicle rose 16 from a year ago to 499 while the average new vehicle lease payment rose 10 to 404 n The average credit score for a new vehicle loan fell one point from a year ago to 710 while the average for used rose three points to 674 Q2 2016 BY THE NUMBERS od climbed to an all time high of 3144 Thats up 452 percentage points from the second quarter of 2015 Even used vehicle leasing showed some life inching up 045 percentage points from a year ago to 371 Thats not to say used leasing is becoming a prime option for car buyers as the transaction type only accounts for about 40000 transactions nationally per quarter The reason for the continued rise in leasing is transaction prices with the average monthly payment for a new vehicle loan coming in at 499 Conversely the average monthly lease payment in the second quarter was 404 And if car buyers werent flocking to leasing they were agreeing to longer finance terms to keep their monthly payments affordable In fact the average new vehicle loan term crept up to 68 months while lease terms remained steady at 36 months Hey a new vehicle every three years for 20 less than the cost to finance carries a certain appeal for many consumers Second quarter data also showed that it wasnt just the prime and superprime tiers that drove leasing to record levels the transaction type experienced doubledigit percentage growth across all tiers on a year over year basis However subprime and deep subprime combined still represents less than 8 of leasing volume USED LOAN VALUES REACH ALL TIME HIGH One trend that picked up momentum during the second quarter was superprime and prime buyers opting for used These buyers opted for used 433 and 599 of the time respectively representing year over year gains of 10 and 66 On average a monthly used vehicle payment was 135 lower than the monthly payment for a new vehicle This cost savings supported by continuing improvements in vehicle quality and reliability spells value as well as reduced cash outlays for these savvy purchasing segments which were obviously looking to simply avoid a high monthly payment And its that shift that has pushed the average credit score for used vehicle loans up four points to 648 Conversely the average credit score for new dropped 10 points to 710 over the same time period CREDIT UNIONS UP FINANCE COMPANIES DOWN The period also saw the auto finance industry surpass the 1 trillion mark in total outstanding balances for the second consecutive quarter with balances totaling 1027 trillion Commanding the largest share were banks and captive finance companies although their market share grew only slightly from a year ago Banks grew their share from 347 in the prior year period to 348 while captives also increased their share from 273 to 277 during the same timeframe Credit unions experienced the largest percentage increase 86 while finance companies experienced a 131 drop in their share IN NEED OF PAYMENT RELIEF Its clear consumers are looking for relief from high transaction prices with the average amount financed on a new vehicle rising 1356 from a year ago to 29880 And even though the average amount financed for a used vehicle rose 225 from a year ago to a record high of 19101 a used vehicle still represents relief from a skyrocketing average newcar payment that is starting to look more like a mortgage Based on Experians second quarter data the growth seen in loan values and the relatively flat state of delinquencies auto finances short term outlook appears to be good for all finance segments A steady hand in meting out risk with subprime and deep subprime customers as well as the ability to keep payments reasonable across all lending types will definitely keep consumers current on their payments the market stable and all bubbles at bay ABOUT THE AUTHOR Melinda Zabritski serves as senior director of automotive credit for Experian Automotive Email her at melinda zabritski@ bobit com 0 1 2 3 4 5 00 05 10 15 20 25 30 020 16 020 Banks Repossession Rates Q2 2013 Q2 2014 030 91 033 062 702 036 1426 275 113 014 14 015 Credit Union TOTAL Finance Other Captive Auto Overall 4 bps increase 187 180 All Banks Percentage of loans and leases 30 DPD 30 Day Delinquency Market Share of Total Financing 203 198 222 219 434 448 126 128 Credit Union Total Market Finance Captive Auto 0 5 10 15 20 25 30 35 348 347 Bank new used units loan lease Q1 2015 Q1 2016 71 74 116 134 187 172 277 273 Captive Finance Co Credit Union BHPH 00 03 06 09 12 15 055 051 Banks Percentage of loans 60 DPD 60 Day Delinquency 042 035 061 057 142 150 030 029 Credit Union TOTAL Finance Other Captive Auto 00 03 06 09 12 15 047 041 Banks Percentage of loan balance 60 DPD Q1 2015 Q1 2016 047 036 058 050 144 136 024 023 Credit Union TOTAL Finance Other Captive Auto 0 1 2 3 4 5 00 05 10 15 20 25 30 020 16 020 Banks Repossession Rates Q2 2013 Q2 2014 030 91 033 062 702 036 1426 275 113 014 14 015 Credit Union TOTAL Finance Other Captive Auto Overall 4 bps increase 187 180 All Banks Percentage of loans and leases 30 DPD 30 Day Delinquency Market Share of Total Financing 203 198 222 219 434 448 126 128 Credit Union Total Market Finance Captive Auto 0 5 10 15 20 25 30 35 348 347 Bank new used units loan lease Q1 2015 Q1 2016 71 74 116 134 187 172 277 273 Captive Finance Co Credit Union BHPH 00 03 06 09 12 15 055 051 Banks Percentage of loans 60 DPD 60 Day Delinquency 042 035 061 057 142 150 030 029 Credit Union TOTAL Finance Other Captive Auto 00 03 06 09 12 15 047 041 Banks Percentage of loan balance 60 DPD Q1 2015 Q1 2016 047 036 058 050 144 136 024 023 Credit Union TOTAL Finance Other Captive Auto