Delinquency rates decrease in Q1 2020; while affordability remains top of mind

April data sheds light into how the industry was impacted during the early stages of COVID-19

Schaumburg, Ill., June 09, 2020 — Delinquency rates on automotive loans were down in Q1 2020, according to Experian’s latest State of the Automotive Finance Market Report. Thirty-day delinquencies decreased from 1.98 percent in Q1 2019 to 1.93 percent in Q1 2020, while 60-day delinquencies dropped from 0.68 percent to 0.67 percent during the same time frame. This comes as the automotive industry grapples with the impact of COVID-19 and financial hardship felt by consumers.

“The decrease in delinquency rates is a positive sign for the industry, though it’s important to recognize other factors may have attributed to the trend,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions. “For example, COVID-19 wasn’t declared a national emergency until mid-March. Add to that, some consumers are likely leveraging financial resources and assistance programs, such as stimulus checks, to manage through financial hardship, so its true impact may not be evident until the months ahead.”

To better assess COVID-19’s early impact on the industry, Experian also analyzed finance trends during the month of April. This data shows new vehicle title changes dropped 50.8 percent compared to the previous year, while used vehicle title changes dropped 54 percent over the same time period. Additional findings show a decrease in leasing year-over-year, with 24 percent of new vehicles being leased in April 2020, compared to 30 percent in April 2019.

Increases in average loan amounts keep affordability top of mind
Affordability was a point of industry conversation prior COVID-19 and will likely remain so as consumers navigate their current financial situations over the coming months. Average loan amounts continued to increase in Q1 2020, with the average new vehicle loan amount reaching $33,739, and average used vehicle loan amount clocking in at $20,723. These increases were reflected in average monthly payments as well, as the average new vehicle payment increased from $554 in Q1 2019 to $569 in Q1 2020. Average used vehicle payments saw an increase in Q1 2020, coming in at $397 compared to $391 the previous year.

As vehicle loan amounts continue to grow and consumers look for the most affordable options, the trend of prime consumers opting to finance used vehicles continued. In fact, prime consumers comprised 50.47 percent of used vehicle loans in Q1 2020. According to the report, used vehicle loans are most common in Mississippi, making up 78.45 percent of vehicle loans in the state. Rounding out the top five states for used vehicle loans are Indiana (77.89 percent), Tennessee (77.78 percent), Michigan (77.51 percent) and Minnesota (77.24 percent).

“As consumers continue to navigate the financial impact of COVID-19, they may consider all options available to them,” Zabritski continued. “Understanding data points like where used vehicle loans are most prominent can help lenders and dealers make informed decisions as consumers begin to re-enter the market.”

Additional findings for Q1 2020:

  • The average credit score for a new vehicle loan was 721, while the average credit score for used vehicles was 660.
  • Subprime loans made up 22.52 percent of total auto loans, which is a historic low for the first quarter of the year.
  • The Honda Civic was the most commonly leased vehicle, making up 3.5 percent of lease market share.
  • Average loan terms saw a slight uptick: average new vehicle terms were 69.17 months in Q1 2020 compared to 68.85 months in Q1 2019 while average used terms increased to 64.83 from 64.67 in the same time frame.
  • Interest rates saw decreases in Q1 2020, as the average new vehicle rate was 5.61 percent and average used vehicle rate was 9.65 percent.

To view the entire Q1 2020 State of the Automotive Finance Market report webinar, visit https://www.experian.com/automotive/automotive-webinars.html.