Used-financing trends produce stable September


Along with sharing some insights on how new vehicles are being financed in the Houston market following Hurricane Harvey, Edmunds reported that nationwide used-vehicle financing trends in September remained stable.

Analysts determined the average term for a used-vehicle installment contract written in September came in at 66.81 months, down just slightly from a year earlier when it was 66.95 months. Five years ago, terms averaged 63.31 months in September, according to data Edmunds shared on Tuesday.

The amount financed to finalize used-vehicle deliveries ticked up by $169 year-over-year to $21,380 in September. During the same month five years ago, the average amount financed for a used-vehicle contract stood at $18,976.

Edmonds noticed the rate ticked up a bit, too, in September as the average APR was 7.52 percent, up from 7.29 percent a year earlier. However, Edmunds pointed out that finance companies wrote paper with a higher APR in September 2012 as the average was 7.96 percent.

The monthly payment buyers are making on used vehicles they took delivery in September came in at $386, up by $6 year-over-year and by $23 compared to five years ago.

The average down payment for a used-vehicle contract rose to $2,494, representing a $141 climb year-over-year and a $309 jump versus September 2012.

Moving over to the new-car side, Edmunds determined Houston-area shoppers who are buying replacement vehicles for those lost in Hurricane Harvey are being a bit more pragmatic. The average new-car down payment was $4,432 in Houston in September, up 18 percent compared to last month and up 24 percent compared to September of 2016.

Additionally, analysts noticed the average monthly payment for a new car in Houston dropped to $571 in September, a 4-percent decline from September of last year and the lowest average monthly payment since July 2015.

Edmunds also mentioned new-car sales in Houston spiked 109 percent in the three weeks immediately following the hurricane when compared to the three weeks before the storm hit.

“Car buyers in Houston tend to opt for pricier trucks and SUVs, so it’s a positive sign to see buyers putting more down up front,” said Jessica Caldwell, Edmunds executive director of industry analysis.

Meanwhile, in the rest of the country, automakers are still grappling to find the right way to trim excess inventory to make way for 2018 vehicles. Despite overall incentives reaching record levels, Edmunds explained OEMs are reticent to offer zero-percent financing deals.

Similar to what Edmunds saw in August, in September only 10 percent of new-car contract had zero-percent financing, compared to 15 percent of loans in September of last year.

“Even though automakers are being very aggressive with incentives, because interest rates are still relatively low, zero-percent financing just isn’t the big draw that it used to be,” Caldwell said.

“Right now dealers are more apt to sweeten the deal through discounted leases or taking cash off of the purchase price, especially on 2017 models that are languishing on the lot,” she added.