Many consumers, faced with continued rising interest rates, switched gears in the first quarter as they made strategic purchases that were easier on their wallets, if only long term.
An Experian report shows some new-vehicle shoppers chose shorter-term vehicle loans, while others returned to the used-car market.
Growth in shorter-term loans was concentrated in the 48-month segment, which grew from 9.5% to 12.5% in the first quarter, Experian said. Sixty-month loan terms rose from 16.5% to 17.4%, while 84-month term loans fell from 35.5% to 31.5%.
“While shorter term loans are usually accompanied by lower interest rates, right now OEMs seem to be offering additional incentives on shorter term loans, which is driving much of the growth in the 48-month segment,” said Experian Senior Director of Automotive Financial Solutions Melinda Zabritski.
Meanwhile, many prime and super-prime buyers returned to used cars during the quarter, prime consumers comprising 42% of financing in the segment, up from 41% year-over-year, and super-prime buyers making up about 14%, up from 11% a year earlier.
“We’re seeing consumers bring more cash and trade-in value to the transaction in hopes of minimizing the amount of interest they’d have to pay on their loans,” Zabritski said. “Additionally, with the combination of fewer new vehicles on dealership lots and high prices, in-market consumers are choosing used vehicles as another way to control vehicle costs.”
The average new-vehicle loan amount rose much less than the jump seen a year earlier, but the average used-vehicle loan total fell $1,590 year-over-year to $26,420, Experian said.
The percentages of financed new- and used-vehicle purchases both fell in the quarter, from 85% to 79% for new models and from 42% to 40% for used.