Special Report: The State of The Auto Loan Market

What's up with new and used car loans? What are the trends in rates? What credit scores are now required? It's all here (and a lot more) in this one special report.

Experian, the U.S. credit reporting giant, paints a picture of the auto lending landscape in its Q1 2012  State of the Automotive Finance Market report. With over 80 charts and graphs, this is the most thorough study The Financial Brand has ever seen on the subject of car loans. Here are some salient excerpts.

During the first quarter of 2011, Americans’ auto loans totaled $637 billion, increasing $26 billion to $663 billion this year.

Today, 77% of new car purchases are financed. About half of all used vehicles involve financing. Of those cars financed, 89% are through a loan vs. 11% with a lease.

Loan rates have dipped. On new cars, borrowers paid 4.56% vs. 4.83% in 2011. For used-car shoppers, the figure was 9.02%, down just a bit from 9.08% last year.

The average sum financed on a new car is now $25,995, $589 higher than last year. On used cars, the figure sits at $17,050, which is $411 more than Q1 2011.

The average payment on a new car in 2012 is $461, only a dollar higher than last year. For used cars, the average monthly payment is $346, up $3 over 2011.

Currently, 39.7% of America’s car loans are held by “super prime” borrowers — folks with Vantage scores 801 or higher. That’s up slightly from Q1 2011, when super prime shoppers held 39.4% of all loans. Borrowers classified as “deep subprime” (i.e. those with Vantage scores below 600) account for just 10.7% of auto loans, which is slightly below last year’s figure of 11.1%.

Overall, the average credit score of new car borrowers has sagged to 760, from a high of 776 in Q1 of 2010. For used cars, credit scores dropped four points to 659. Comparatively, credit scores in Q1 of 2008 were at an average of 753 for new vehicles and 653 for used.

The vast majority of all auto loans are 4-6 years, with only around 1 in 10 extending to 73-84 months.

Delinquency rates are at historic lows. Only 2.03% of bank auto loans are 30 days delinquent, a 10% improvement over the 2.25% delinquent rate in 2011. For credit unions, the percentage of 30-day delinquencies is significantly lower, at 1.24%, a 13% reduction since last year.

At banks, 1 in 200 auto loans are 60-days past due. At credit unions, only 1 in 330 are that delinquent. Repossessions among both banks and credit unions are down in 2012, averaging around 1 in every 425 cars financed. Auto repossession rates dropped by 37.1% overall.

Key Findings & Takeaways

  • Overall, open portfolios continue to be strong with increasing total balances (up nearly $27 billion)
  • Historic lows for delinquencies
  • Credit continues to loosen on originations
  • Sub-prime share financing has increased (11% on new, 4% on used)
  • Average scores continue to decrease
  • Finance amounts increased for both new and used
  • Terms increasing among all risk segments
  • Long term loans growing
  • Rates decreasing for both new and used

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