Experian: 62% of borrowers opted for used cars in Q2
Sixty-two percent of auto borrowers financed used vehicles during the second quarter, up 2 points from the first quarter and 4 points from a year earlier, Experian said Thursday.
The flight to used vehicles was seen at all levels of credit, with the largest gain seen among the 77% of quasi-preferred customers financing used models, up 5 points from the previous level. ‘last year. Experian defines near primes as customers with credit scores between 601 and 660.
“Between inventory shortages and rising vehicle costs, consumers are looking to make the most profitable decision, which is often a used vehicle,” Melinda Zabritski, senior director of automotive financial solutions at Experian, said Thursday. . “The benefit of a higher vehicle value is that consumers can get more for their trade-in, which can help offset the increased cost of their next vehicle.”
Used vehicle buyers financed record amounts in the second quarter, borrowing $28,534, up nearly $4,500 from a year earlier, and agreed to record monthly payments of $515 $, up $75 from a year earlier, according to Experian. They have also committed to record loan terms of 68 months, nearly two months longer than second quarter 2021 terms.
Zabritski called the increase significant in an interview Wednesday with Automotive News. Historically, loan terms have only increased by a tenth of a month, according to Zabritski. From the middle of last year, used vehicle loan terms began to increase by half a month or more at a time, she said.
Despite these other record-setting used-vehicle lending measures, borrowers effectively saw the same interest rates as a year ago. Experian said used vehicle loans had an interest rate of 8.62% in the second quarter, up just 0.03 points from a year earlier.
At the same time, the federal funds rate, which influences consumer interest rates, fell from 0.07 points in the second quarter of 2021 to 0.77 points from April to June 2022.
Zabritski attributed the minimal increase in used-vehicle interest rates to a greater proportion of customers opting for financing from credit unions, which she said typically charge lower rates than other lenders.
While banks raised interest rates on used vehicles in the second quarter from last year’s figure, “credit unions are still lower from last year,” said Zabritsky. Credit union rates were about 2 percentage points lower than bank rates, she said.
Credit unions held a 29% share of all used-vehicle loans in the second quarter, up 5 points from a year earlier and more than any other second quarter in the past five years. Credit unions also increased their overall finance market share with 26% of all new and used vehicles, up 8 points from the previous year and also higher than the previous five years.
“With the market dynamics we’re seeing right now, lenders’ shift in market share makes sense, as credit unions often offer two things consumers are looking for: lower interest rates and longer terms. “Zabritski said in the statement.
“It helps manage their monthly payment, which is often consumers’ top priority when considering financing options. Understanding these trends will allow lenders and dealerships to help consumers make the most informed decisions when shopping. purchase of a vehicle.