The average new vehicle loan amount in Q3 2023 fell to $40,184, a drop from the previous year's $41,543, according to Experian's State of the Automotive Finance Market Report, a welcome change after a period of steady increases. Similarly, the average loan amount for used vehicles was $27,167, a reduction of $1,517 from the same quarter the year before.
The report also indicated only modest increases in the average monthly payments for new and used vehicle loans, despite a rise in interest rates. New vehicle loans saw an average monthly payment increase of $25, reaching $726, while used vehicle loans increased by $4 to $533. The average interest rates for new and used vehicles have risen to 7.03% and 11.35%, respectively.
"While we’ve seen the average loan amount for new and used vehicles rise over the last three years, it’s a welcome sight to see average vehicle loan amounts decrease," said Melinda Zabritski, Experian's head of automotive financial insights. "With monthly payments remaining relatively stable despite rising interest rates, the industry seems to be heading in a positive direction, especially with consumers having more options available to them during the financing process."
The report also revealed a trend towards shorter-term loans for new vehicle shoppers. In Q3 2023, 13.4% of new vehicle loans had terms in the 1- to 48-month category, an increase from 9.99% the previous year. The report attributes much of this shift to the lower interest rates available for shorter-term loans.
In the captive market, significant growth was observed. Captives comprised the majority of the total financing market share at 30.43%, a considerable rise from 21.55% in Q3 2022. This growth is also reflected in new vehicle financing, where captives accounted for 59.18% of the market share.
Additional findings from the report include the dominance of credit unions in the used vehicle market, the slight decrease in average loan terms for both new and used vehicles, and a growing market in prime and super prime financing sectors. Delinquency rates were also reported, with 30-day delinquencies reaching 2.33% and 60-day delinquencies at 0.91%.