Experian State of the Automotive Finance Market

According to Experian's Q3 2020 State of the Automotive Finance Market report, the automotive finance industry is slowly recovering from the impacts of the COVID-19 pandemic. The report provides insight into the trends and performance of the automotive finance space in the US.

One key finding is that the average credit score for new car loans increased to 721, which is the highest it has been in the past ten years. This indicates that consumers are prioritizing their credit scores, even during the pandemic. Additionally, the average monthly payment for a new car loan increased to $569, up $20 from the previous year.

Despite these positive indicators, the report highlights that the average term for a new car loan also hit a new record. The average term is now 71 months, which is almost six years. This indicates that more consumers are taking longer to pay off their auto loans, potentially due to financial strain caused by the pandemic.

Another trend noted in the report is that leasing continues to be a popular option for car buyers. In fact, leasing made up 25.8% of all new vehicle vehicles in Q3 2020. This is a slight decrease from last year, but still a significant portion of the market.

Experian also reports that auto lenders have become more lenient with their lending standards, with a decrease in the percentage of new car loans going to super-prime and prime borrowers, and an increase in the percentage going to subprime and deep subprime borrowers. This shift could potentially put some borrowers at a higher risk of defaulting on their loans.

In terms of used car financing, the report found that the average credit score for used car loans is now 657, a slight increase from last year. The average interest rate for used car loans also increased to 9.49%, up from 9.34% in Q3 2019. However, despite these increases, more consumers are opting for used car loans. In fact, used car loans made up 55.6% of all auto loans in Q3 2020.

Overall, the state of the automotive finance market remains relatively stable, with positive indicators for credit scores and monthly payments, and continued popularity of leasing and used car loans. However, the increase in average loan terms and shift in lending standards are both causes for potential concern.