Most consumers finance a new car deal, relying on car leasing or a personal loan to close their purchases. With credit much looser than it was during the recession, consumers are able to find expanded financing opportunities as well. Confirming this trend is the just released State of the Automotive Finance Marketreport issued by Experian Automotive. That report underscores how the surging automotive market is being aided by improved consumer financing choices.
Experian Automotive Report
The Experian Automotive report reveals that 84.5 percent of consumers who acquired a new vehicle in the second quarter either leased it or obtained a loan. That number is up from 82.5 percent one year earlier and from 79.7 percent five years earlier. Notably, the 2008 figure is just before the last recession kicked in.
Said Melinda Zabritski, senior director of automotive credit for Experian Automotive, “Loans have become more accessible in recent years, and we’ve seen a steady growth in the percentage of consumers financing their vehicles.” Zabritski noted that consumers are more confident about taking out a loan as evidenced by the corresponding reduction in delinquencies.
To obtain financing, consumers need not have excellent credit, but it certainly provides better financing options when they do. Loan and lease terms are set according to a number of factors with the consumer’s three-digit credit score playing no small part in that equation. Consumers had an average credit score of 760 for new vehicle leases and 749 for new vehicle loans according to the report.
Leasing and Lending
Lease payments typically average lower than financing, something the latest report confirms. Monthly lease average payments of $408 were nearly $50 less than the $457 for new vehicle loans. Lease terms averaged 35 months and new car loan terms averaged 65 months in the second quarter of this year.
Consumers with less than stellar, even bad credit, can often qualify for a lease or a car loan too. For new cars, 27.45 percent of loans were categorized as nonprime, subprime or deep-subprime. For used cars, 57.31 percent of loans were similarly categorized.
The average price of a new vehicle is more than $30,000, thus the average amount financed for a new vehicle was $26,526 and $17,913 for used. Interest rates have been tracking higher lately, but the average interest rate on a new car loan was 4.46 percent and 8.56 percent for used. Used car loans are also not too far behind new car loans in loan length, averaging 61 months to the 65 months for new cars.
Your Personal Credit
Consumers on the hunt for a new car can find a vast trove of information on the Internet. Just as you would shop and compare vehicle offers between dealers, you can do the same with lenders for loans. Banks, credit unions and new car dealers are among the places to look for a new car loan. Your dealer most likely will arrange your leasing although there are other leasing options available.
You can help your cause by reviewing your credit reports and obtaining your credit score before you shop for a car. Free copies of all three of your credit reports (Experian, Equifax and TransUnion) are available through AnnualCreditReport.com You can obtain your credit score through this site for a fee or by visiting MyFico.com. Experian Automotive is, by the way, part of Experian plc, one of the three major credit reporting bureaus serving American consumers.