One in 4 Vehicles Financed by Credit Unions in Q4 2022, as Consumers Search for Lower Interest Rates

New Experian report shows average loan amount increases tapering off, while average terms decreased

In the fourth quarter of 2022, credit unions held the largest percentage of the vehicle finance market, for the first time. According to Experian’s State of the Automotive Finance Market Report: Q4 2022, credit unions accounted for 26.85% of all vehicle financing during the quarter, comprising the largest share of vehicle financing across the lending marketplace. Taking leasing out of the equation, credit unions make up nearly 30% of all vehicle loans, at 29.12%. This was followed by banks (27.35%), captives (19.53%), and finance companies (12.67%).

“The biggest driver of credit union growth was lower interest rates, for both new and used vehicle financing. Even as rates overall have increased, credit unions have managed to be a full percentage point lower than other lenders,” said Melinda Zabritski, Experian’s senior director of automotive financing. “In addition to lower rates, we continue to see fewer incentives from captive lenders, giving credit unions the opportunity to grow market share in the competitive rate environment. Having a broader understanding of data like interest rates can help lenders and dealers make strategic decisions and serve consumers effectively.”

In Q4 2022, the average interest rate offered by credit unions for new vehicles was 5.49%, with captives slightly lower at 5.45%. Banks clocked in at an average interest rate of 7% for new vehicle loans, while buy-here-pay-here was 6.06% and finance companies offered 9.38%. On the used side of financing, credit unions offered the lowest rate on average, at 7.03%, followed by captives at 9.25%, banks at 9.34%, buy-here-pay-here at 11.2% and finance companies at 19.17%.

Average loan amounts begin to level out

Zooming out to look at the market overall, increases in average loan amounts began to taper off in Q4 2022. The average new vehicle loan amount increased 4.04% year-over-year, to $41,445—a much smaller year-over-year increase than Q4 2021, when it was 12.46%. The difference was even more notable for used vehicles, with an increase of only 1.38% on the average loan amount year-over-year reaching $27,768, compared to a 20.96% increase in Q4 2021.

Average loan terms also leveled out in the fourth quarter, with the average new vehicle loan term decreasing from 69.64 months in Q4 2021 to 69.44 months in Q4 2022. Used vehicle loans saw a slight uptick in length, clocking in at 68.01 months in Q4 2022, up from 67.35 months in Q4 2021.

“Seeing attributes like loan amount growth and average terms beginning to normalize is a positive sign the industry is moving in the right direction,” Zabritski continued. “It’s important to pay attention to all attributes to have a holistic picture of the industry.”

Additional findings of Q4 2022:

• Overall loan balances continued to grow, from $1.3 trillion in Q4 2021, to $1.4 trillion in Q4 2022.
• Leasing saw a year-over-year decrease, from 23.95% to 17.21% from Q4 2021 to Q4 2022.
• Prime and super prime comprised 66.5% of all vehicle financing in the fourth quarter of 2022, up from 64.98% in Q4 2021, while subprime saw a decline, from 16.38% to 15.57% year-over-year.
• The share of financing made up by sedans grew from 17.69% in Q4 2021 to 18.26% in Q4 2022.
• Honda remained the top leased make at 12.07%, followed by Chevrolet at 9.17% and Toyota at 8.85%.

To learn more, watch the entire State of the Automotive Finance Market: Q4 2022 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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