Prime Credit Consumers Turn to Used Vehicles
Jun 27th, 2019 @ 9:16 AM by Amber Nelson
As prices for new vehicles continue to hit record highs, U.S. consumers with great credit are choosing to buy used cars more often.
According to data from credit agency Experian, during the first quarter of 2019, 61.8% of borrowers with prime credit and 44.7% of those with super prime credit scores took out loans for used vehicles. Those percentages have never been higher.
That trend may have something to do with the fact that the average new car price just topped a new record in the first quarter at $32,187. Used vehicle prices also grew to a record high with an average of $20,137.
That brought average monthly payments to new highs as well. New-vehicle loans averaged payments of $554 a month and used-vehicle loans jumped to $391 a month. Loan terms have stretched out to well beyond five years for both new and used vehicles, with 68.85 months and 64.67 months, respectively.
With such high prices more consumers are forgoing new cars, and more are turning to leasing options over purchasing.
“While vehicle affordability continues to be top of mind for the industry, consumers are actively seeking ways to ensure they can afford the vehicle they purchase — a positive sign for all parties involved,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions. “It’s important that lenders and dealers continue to monitor these trends so they can work with car shoppers to help them find the right vehicle with the right financing options.”
Meanwhile the 30-day delinquency rate rose to 1.98% in the first quarter, up from 1.9% one year earlier. Delinquencies are still down significantly from their 2009 peak of 2.81%.
“The delinquency rate is certainly a trend worth keeping an eye on, but it’s important to consider it within the larger historical context,” Zabritski said. “Other factors, like subprime originations remaining at historic lows, help paint the full picture of the industry.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.