The difference between new- and used-car average monthly payments reached its highest level on record, according to Experian’s latest Automotive Finance Market report.
The average monthly payment for a new vehicle in 2015’s second quarter was $483. For used cars, it was $361. That’s the widest the gap since data-tracker Experian began publicly reporting the information in 2008.
The difference between the average total loan amounts for new and used vehicles also went up: $28,524 for the former, $18,671 for the latter, nearly a $10,000 difference.
“As the price of new vehicles continues to rise, and the gap between monthly payments for new and used vehicles widens, we see more and more consumers looking for ways to keep their vehicle payments affordable,” says Melinda Zabritski, Experian’s senior director of automotive finance.
“This could be especially true for consumers who have the financial ability to pursue a new vehicle, but may have sticker shock at the rising prices and don’t want the accompanying high monthly payments.”
The report indicates car buyers continue to stretch loan terms to keep payments down. That’s especially the case for used vehicles. It also shows the greater longevity of today’s used cars over their predecessors. Consequently, auto lenders are more willing to approve longer loan terms for used cars, but at higher interest rates than for new cars.
The percentage of used vehicles financed for 73 to 84 months increased 14.8% compared with second quarter-2014. That’s a record high. New vehicles financed for the same term length climbed 19.7% from the previous year to reach 28.8%.
Leasing remains popular and offers consumers a way to get more car for the money, although, of course, it’s not theirs to keep.
Leasing reached 31.4% during the second quarter, up from 30.2% year-ago. That is in marked contrast to 2009 and 2010 when leasing was on life support.
The Experian report says leasing terms also increased, extending past the average of 36 months into the 37- to 48-month range.
With the longer terms, the average lease payment dropped $13 a month, going from $407 in the second quarter-2014 to $394 this year.
“The automotive finance market continues to progress in response to consumer demand,” Zabritski says. “The availability of different financing options allows consumers to stretch their dollar and more easily find a vehicle that meets their budgetary needs.”
The average credit score for a new-vehicle loan dropped two points from last year to 709. The average credit score for a used loan increased one point to 645 over the same time period.
During the second quarter, the average interest rate for new-vehicle loans was 4.8%, up from 4.6% year-ago. The interest rate for used-vehicle loans was 9.1%, up from 8.8%.
