As subprime financing showed more signs of strengthening, too, Experian Automotive determined new-vehicle leasing during the first quarter rose to the highest level since the firm began tracking the data in 2006.
According to its State of the Automotive Finance Market report released on Tuesday, Experian indicated leasing accounted for a record 27.5 percent of all new vehicles financed during Q1. The level jumped 12.5 percent from the year-ago mark of 24.4 percent.
Additionally, findings from the report showed that the average monthly payment for a new vehicle financed in Q1 was $459, down from $462 a year earlier.
“Consumers tend to shop for vehicles based within the limits of their budget, and leasing is often seen as a viable path to a lower monthly payment,” said Melinda Zabritski, senior director of automotive credit at Experian.
“Lenders have seen overall stability come back to the market since the recession, and leasing has gradually returned as a larger part of many lender strategies,” Zabritski said.
Zabritski will be one of the keynote speakers at this year’s new edition to Used Car Week, the SubPrime Forum, which will be conducted on Nov. 12 and 13 at the Manchester Grand Hyatt in San Diego. More details can be found at www.usedcarweek.biz.
Zabritski mentioned that while leasing a vehicle can help consumers achieve a lower monthly payment, she pointed out the report also showed a rise in loan term lengths (65 months in Q1 2013, up from 64 months in Q1 2012) and a decrease in interest rates (4.5 percent in Q1 2013, down from 4.6 percent in Q1 2012), which helped to keep payments low for new vehicles financed.
In Q1, the average loan amount for a new vehicle financed increased by $628, going from $26,020 in Q1 2012 to $26,648 in Q1 2013.
The average used vehicle loan increased $461, going from $17,071 in Q1 2012 to $17,532 in Q1 2013.
Subprime Loans on the Rise
Experian report also showed that consumers within all credit tiers were able to obtain financing in Q1.
Most notably, loans going to consumers with credit outside of prime (nonprime, subprime and deep subprime) jumped to 45.2 percent of the overall loan market in Q1, up from 44.4 percent in Q1 2012.
For new vehicles, the share of these loans jumped to 25.1 percent in Q1 from 23.2 percent in Q1 of last year.
For used vehicles, nonprime, subprime and deep subprime loans accounted for 57.7 percent market share in Q1 2013, up from 56.8 percent in Q1 a year ago.
In other trends:
—The average credit score for a new vehicle loan dropped to 755 in Q1 2013, down from 760 in Q1 2012.
—The average credit score for a used vehicle loan dropped to 657 in Q1 2013, down from 659 in Q1 2012.
—Finance companies had 15.5 percent market share, up 5.1 percent from Q1 2012.
—Banks had 39.5 percent market share, down 1.7 percent from Q1 2012.
—Captive finance companies had 17.3 percent market share, up 3.4 percent from Q1 2012.
—Credit unions had 16.7 percent market share, up 0.4 percent from Q1 2012.
—Buy-here, pay-here financing had 10.7 percent market share, down 6.4 percent from Q1 2012.