SCHAUMBURG, Ill. — The automotive finance market saw strong performance during the first quarter, according to Experian’s Q1 2021 State of the Automotive Finance Market report. Total open automotive loan balances increased from $1.168 trillion in Q1 2020 to $1.288 trillion in Q1 2021. Much of the growth was driven by captive lenders, who saw significant growth year-over-year, from 23.82% of the automotive finance market share to 28.02% from Q1 2020 to Q1 2021.
While captives have seen notable growth, there should be continued opportunity for other players to increase market share.
Prime and super prime consumers continued to make up the largest portion of financing in Q1 2021, comprising 64.88% of total financing, compared to 60.56% a year ago. In addition, the findings show that prime consumers are opting to finance new vehicles in larger quantities. In Q1 2020, 66.61% of prime and 50.15% of super prime consumers opted for used vehicles, which decreased to 62.76% and 45.41% in Q1 2021, respectively.
“The industry continues to be resilient, despite the continuation of some of the challenges caused by COVID-19, such as used inventory and global chip shortages,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions. “While captives have seen notable growth, there should be continued opportunity for other players to increase market share. Focusing on data to better understand these trends will help lenders and dealer navigate the dynamic marketplace.”
Highlighting geographic auto finance trends.
While captives increased their market share on a national level, looking at the data on a regional level shows some differences. Captive lenders hold the majority share of financing in the West (31.23%) and Northeast (44.34%), but banks took the top spot for the Midwest (33.26%) and South (30.83%) regions.
In addition, there are regional differences in the types of vehicles being financed. For instance, the Ford F150 is the top financed new vehicle in the Midwest and South regions, compared to the Toyota RAV4 in the West region and the Honda CR-V in the Mideast. These differences also impact average MSRP in the regions, which is slightly higher in the West region, at $38,121, and lowest in the Northeast region at $36,989.
Average loan attributes remain consistent.
Average loan amounts and monthly payments saw smaller increases year-over-year compared to recent quarters. The average new vehicle loan amount was $35,392 in Q1 2021, up from The automotive finance market moved forward at a healthy pace in Q1 2021, with total open loan balances reaching $1.288 trillion Page 2 of 2
$33,833 in Q1 2020, while the average monthly payment increased $7 year-over-year to $577. Used vehicle financing saw similar changes, with the average loan amount increasing from $20,689 in Q1 2020 to $22,375 in Q1 2021, while the average monthly payment increased from $394 in Q1 2020 to $413 in Q1 2021. These larger loan amounts and average monthly payments can likely be attributed to consumer preferences for larger vehicles, with more than 56% of new vehicles financed falling into the SUV segment.
“Affordability will likely continue to remain a prominent topic in the industry as we move through 2021,” Zabritski continued. “As the industry continues to navigate tight inventory and other potential disruptions, ensuring that lenders and dealers are able to meet consumers’ needs will require staying close to the data to make the most strategic decisions.”
Additional findings for Q1 2021:
• Leasing was down in Q1 2021: 26.66% of new vehicles were leased, compared to 30.68% in Q1 2020, while 8.56% of used vehicles were leased, down from 9.83% in Q1 2020.
• The average difference between a loan and lease payment was $108 in Q1 2021.
• Average credit scores increased year-over-year, with the average new vehicle credit score increasing from 728 in Q1 2020 to 734 in Q1 2021, and increasing from 655 to 663 for used vehicles, in the same time frame.
• The average term for a new vehicle loan saw a slight uptick from 69.03 months in Q1 2020 to 69.50 months in Q1 2021, while on the used side the increase was more notable, from 64.54 months to 65.74 months year-over-year.
To learn more, watch the entire Q1 2021 State of the Automotive Finance Market report webinar.