Auto loan amounts increasd in the second quarter with the average new vehicle loan hit $32,119 (up $1,161 YOY). Average used vehicle loan amounts reached $20,156 in Q2 2019, up $448 YOY. Given the data, consumers looked for ways to find more manageable payments.
In response to higher prices, longer loan terms have become more popular and have steadily risen over the past several years. Both used vehicle and new vehicle loans saw an increase in 72-month terms, the most common term length across all loan types. The average new vehicle loan term was a record in the second quarter of 2019 – a little over 69 months, according to Melinda Zabritski, Experian’s senior director of automotive financial solutions. Additionally, the percentage of loan terms over 85 months increased for new loans.
With a nearly $12,000 difference in loan amounts between new and used vehicles, consumers turned more frequently to used vehicles than in past years. Compared to last year, Q2 saw increases in both the percentage of used vehicles with financing (up 1.2 percentage points), and the percentage of used vehicles in the lease market (up 0.69 percentage points). Origination rates also started to shift further in favor of used cars, growing from 55.16% of the total vehicle financing market in 2018 to 57.29% in 2019.
Another popular option among consumers to help drive monthly payments down were leases, which comprise 30% of the auto finance market. Compared to auto loans, monthly lease payments can be significantly lower. While leases are most popular among prime and superprime consumers compared to other risk tiers, the overall number of consumers choosing to lease vehicles did decrease YOY by 0.62%.
The overall automotive loan market is remaining incredibly stable. Average loan balances keep growing and delinquency rates are flat year-over-year. But, if vehicle prices continue to rise, consumers will be forced to look for solutions to their affordability challenges.