As captive activity also registered gains, Experian Automotive highlighted on Wednesday that what it classifies as finance companies — institutions that don’t hold customer deposits but get most of their business from consumers with subprime and deep-subprime credit — gained a healthy amount of market share year-over-year during the third quarter.
According to the Q3 2015 State of the Automotive Finance Market report, finance company market share reached 13.34 percent in Q3, up 6.4 percent from the previous year.
Meanwhile, Experian indicated one of the biggest shifts in the automotive lending industry during Q3 was the resurgence of captive lenders — the lending companies owned by vehicle manufacturers.
In the third quarter, captive lenders financed 51.6 percent of new-vehicle loans, up from 36.8 percent in Q3 2011. This gain represents the largest market share of new-vehicle financing for captives since the recession.
Market share findings for other lending types show commercial banks still holding the largest share for new and used vehicle loans combined, at 34.7 percent.
“Captive lending has made a comeback since suffering a steep drop-off caused by declining new sales and lender-type shifts during the recession,” said Melinda Zabritski, Experian’s senior director of automotive finance.
“This is good news for manufacturers, as their captive finance companies often provide an additional source of revenue as well as a strong pipeline to credit for their dealer networks,” Zabritski continued
Experian mentioned five other interesting findings from its Q3 data, including:
• Consumers continue to rely on financing; the percentage of new vehicles financed reached an all-time high of 86.6 percent.
• The average credit score for a new vehicle loan fell to 710, the lowest since Q3 2007.
• During Q3, the average monthly payment for a new vehicle was $482, up $12 from the previous year.
• The average monthly payment for a used vehicle reached $361, an increase of $3 from a year ago.
• The average interest rate for a new vehicle hit 4.63 percent, while the average interest rate for a used vehicle reached 8.76 percent.
More leasing as contract terms lengthen
Experian has never seen this many new models roll over the curb connected to a lease.
Zabritski indicated leasing accounted for nearly 27 percent of all new-vehicle transactions in Q3, up from 24.7 percent the previous year. This level marks the highest percentage of vehicles leased since Experian began tracking the data publicly in 2006.
Findings from the report also showed that the average monthly lease payment was $398 during the quarter, up $1 from a year ago.
“As the price for a new or used vehicle continues to rise, leasing has become a more viable financing option for consumers looking to maintain an affordable monthly payment,” Zabritski said.
“While consumers can save an average of $84 per month by leasing rather than taking out a loan on a new vehicle, they should make sure leasing fits their lifestyle,” she continued. “Oftentimes there are mileage caps and other considerations that consumers should familiarize themselves with before entering into a leasing agreement.”
Rising vehicle prices also have given way to record loan amounts for new and used vehicles.
During the third quarter, the average amount financed for a new vehicle was $28,936, up $1,137 from the previous year.
The average amount financed for a used vehicle was $18,866, up $290 over the same time period.
Furthermore, Experian pointed out the gap between new and used loan amounts also has grown. On average, consumers finance $10,070 less on a used vehicle than on a new one.
Extending loan terms is another method consumers turned to in order to keep monthly payments low. During Q3, Experian determined the percentage of consumers who took out new and used vehicle loans with terms between 61 and 72 months reached all-time highs.
For new vehicles, approximately 44 percent took out 61- to 72-month loans, and more than 41 percent financed a used vehicle for the same duration.
Analysts noticed the percentage of consumers extending their loans even longer also has increased.
Loans for new vehicles extending 73 to 84 months increased 17.1 percent over the previous year, reaching a Q3 record high of 27.5 percent.
Used-vehicle loans extending in the 73- to 84-month term, however, reached an all-time high of 16.2 percent (a 12-percent increase over the previous year).