Captives Recapture Total Vehicle Financing Market Share in the U.S.

New Experian report shows consumers continuing to opt for shorter term loans

In the second quarter of 2023, captives regained the lion’s share of total vehicle financing, outpacing banks and credit unions. According to Experian’s State of the Automotive Finance Market Report: Q2 2023, captives made up 29.05% of the total vehicle financing market in the U.S., up from 22.15% the previous year. They were followed by banks (24.84%), credit unions (22.49%), finance companies (13.09%) and BHPH/others (10.52%).

The trend was more pronounced with new vehicles, where captives made up 58.47% of new vehicle financing (up from 46.80% in Q2 2022), followed by banks (22.25%), credit unions (13.70%), finance companies (4.45%) and BHPH/others (1.13%).

“With more incentives in the market and consumers leaning back into new vehicles, naturally we’d expect captive lenders to take back market share,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions. “Based on current market conditions, maintaining a close eye on consumers’ buying preferences, such as loan terms and preferred makes and models, lenders and dealers can help consumers find vehicles that fit within their budgets.”

Average loan terms continue to decrease

Amid rising interest rates, consumers are continuing to opt for shorter term loans. Much of the growth in shorter term loans for new vehicles was in the 1- to 48-month segment (where it increased from 9.53% in Q2 2022 to 14.58% in Q2 2023). There was a similar trend on used vehicle loans, where loans with 1- to 48-month terms made up 11.31% in Q2 2023 compared to 10.06% the previous year. As a result of shorter-term loans, the average monthly payment of new and used vehicles increased. The average monthly payment for a new vehicle increased to $729 in Q2 2023, from $672 in Q2 2022 and the average monthly payment for a used vehicle saw a slight uptick from $519 last year to $528 this quarter.

The average interest rate for a new vehicle increased to 6.63% in Q2 2023, from 4.60% in Q2 2022, marking a more significant year-over-year growth compared to 4.17% in Q2 2021. Similarly, the average interest rate for a used vehicle increased to 11.38% this quarter, from 8.84% last year and 8.59% in Q2 2021.

Leasing shows slight growth

While leasing decreased significantly beginning in 2020, data shows leasing experienced a slight uptick to 21.29%, from 19.92% last year.

Digging a bit deeper, the Telsa Model 3 (1.79%) marked the first time an electric vehicle appeared in the top 10 leased models.

“While the industry continues to shift, it’s important for automotive professionals to watch the consumer purchase trends as they make informed decisions,” said Zabritski. “With shorter loan terms and the average price difference from loan to lease, it’s not uncommon to see consumers lean towards more budget-friendly options.”

Additional findings for Q2 2023:

• The total outstanding U.S. vehicle loan balance grew 6.5% year-over-year, reaching $1.45 trillion in Q2 2023.
• The market continues to grow in prime (45.58%) and super prime (21.77%), making up over 67% of total financing in Q2 2023.
• The average new vehicle loan amount only increased $70 year-over-year, reaching $40,657. The average used vehicle loan amount dropped $1,744 to $26,863 over the same period.
• 30-day delinquencies reached 2.28% in Q2 2023, while 60-day delinquencies reached 0.82%.

For more information, view the full State of the Automotive Finance Market Report: Q2 2023 presentation.

About Experian

Experian is the world’s leading global information services company. During life’s big moments – from buying a home or a car, to sending a child to college, to growing a business by connecting with new customers – we empower consumers and our clients to manage their data with confidence. We help individuals to take financial control and access financial services, businesses to make smarter decisions and thrive, lenders to lend more responsibly, and organizations to prevent identity fraud and crime.

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