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Auto Loan Amounts Continue to Rise, Experian Reports

Dealers increasingly rely on credit unions to snag low rates for buyers.

The average loan amounts for both new and used vehicles continue to rise as new-car inventory remains curtailed due to chip shortages, according to Experian’s State of the Automotive Finance Market Report: Q3 2022.

The average used-vehicle loan amount increased more than 8% year-over-year to $28,506, significantly less than the 21% year-over-year increase reported in Q3 2021, says Experian. Year-over-year monthly used-car payments rose from $472 to $525. The average new-vehicle loan amount increased about 10%, from $37,753 in Q3 2021 to $41,665 in Q3 2022. The average monthly payment for a new vehicle hit a record high in Q3 2022, rising from $618 in 2021 to $700 in 2022.

“Since the start of the inventory shortage, used-vehicle values rose at a staggering rate, and that appears to be slowing, which is a positive sign for consumers looking to purchase a vehicle,” says Melinda Zabritski, Experian’s senior director of automotive financial solutions. “While average loan amounts and monthly payments are continuing to grow, there are many contributing factors, such as the rise in interest rates.”

Zabritski finds it telling that credit unions accounted for 28% of vehicle loan amounts in Q3. Banks accounted for just over 27% of such loans. Analysts predicted credit unions would gain market share this year but found it interesting that it occurred relatively quickly, thanks mainly to the low interest rates they offer, she says.

“From the dealer side, I recommend they stay aware of lenders and loan programs,” she tells Wards. “We’re hearing from more and more dealers that you can’t beat credit unions (for low interest rates). But it’s important to have a full spectrum of lenders because if your customer has a subprime score (generally 669 or lower), there are lenders that will finance that deal.”

“The other point (from the report) is that we continue to see the large growth of loan amounts and monthly payments, especially on the new-vehicle side,” she says. “We are nearly hitting those record highs, but at the same time, it is nice to see amounts, especially on the used-vehicle side, start to taper off a bit.”

Other key points from the report:

  • SUVs comprised 60% of the finance market, while sedans decreased to 17% from 20% the previous year. Some of the decreases may be due to inventory shortages, Zabritski notes.
  • Subprime loans grew from 1.76% to 1.85%.
  • Overall, loan balances grew more than 7%.
  • In Q3 2022 the average interest rate was 5.16% for new-vehicle loans and 9.34% for used, up from 4.09% and 8.12%, respectively, from year-ago.
  • The average credit score for new-vehicle loans increased, from 733 to 738 year-over-year. Those are generally considered Super Prime credit scores. Used-vehicle loans increased from 675 to 678 year-over-year. That is considered a "Good" credit score.
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