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Experian Automotive: Historically high loan terms and low interest rates kept monthly auto payments down in Q4 2012

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SCHAUMBURG, IL--March 5, 2013: Experian Automotive today released that average loan terms for a new vehicle in Q4 2012 jumped to an all-time high of 65 months, up from 63 months in Q4 2011. Terms for used vehicles stayed flat at 60 months. Findings from the Q4 State of the Automotive Finance Market analysis showed that the average interest rate for new and used vehicle loans dropped in Q4, and average monthly payments dropped versus the same time period in Q4 2011.

"Overall, Q4 2012 was a very favorable time for consumers to buy a new or used vehicle in terms of overall monthly payments," said Melinda Zabritski, director of automotive credit for Experian Automotive. "Lower interest rates and longer loan terms made it easier for consumers to finance a vehicle while keeping their payments affordable. This, combined with the fact that more vehicle loans went to consumers with credit outside of prime, portends a vital and healthy automotive market."

The report also showed that the average loan amount for a new vehicle was $26,691 in Q4 2012, up $272 from Q4 2011, while the average used vehicle loan was $17,629 in Q4 2012, up $239 from Q4 2011.

However, while consumers are taking out larger loans, lower interest rates and longer loan terms for new vehicles helped bring down the average monthly payments. For example, the average interest rate for a new vehicle loan in Q4 2012 dropped to 4.36 percent, from 4.52 percent in Q4 2011, while the average interest rate for a used vehicle loan dropped to 8.48 percent, from 8.67 percent in Q4 2011. Additionally, the average monthly payment for a new vehicle dropped from $468 in Q4 2011 to $460 in Q4 2012.

More consumers also were able to obtain financing in Q4, as average credit scores for both new and used vehicles dropped. For new vehicle loans, the average consumer credit score was 755 in Q4 2012, down six points from Q4 2011. For used vehicle loans, the average consumer credit score dropped to 665 in Q4 2012, down five points from Q4 2011.

In other findings from the Q4 2012 report:

  • Automotive loans for new vehicles with terms from 73 to 84 months increased by 19.4 percent over Q4 2011
  • New lease share of new financing increased to 24.79 percent, up from 10.45 percent in Q4 2011
  • The total subprime market for all new vehicle financing increased by 9.7 percent to 24.77 percent, up from 22.59 percent in Q4 2011
  • The total subprime market for all used vehicle financing increased by 3.4 percent to 55.4 percent, up from 53.58 percent in Q4 2011
  • Buy Here/Pay Here (BHPH) organizations and credit unions showed the strongest market share growth of 4.3 percent and 3.9 percent for overall automotive loans
  • Banks have the highest market share of automotive loans at 41.2 percent

Experian Automotive's quarterly credit trend analysis features market reporting data and analysis from its AutoCount Risk Report, which analyzes automotive lending markets based on a uniform measurement of credit quality that segments markets by geography, credit score and vehicle registrations, among other factors. It also incorporates data from the Experian--Oliver Wyman Market Intelligence Reports, which provide topical, quarterly analysis; peer benchmarking options; and commentary on key issues facing the financial services industry.