Vehicle affordability is becoming an increasingly hot-button question as trucks and SUVs release with MSRPs well over $30,000 to start before popular options and equipment. In turn, used-car sales continue to grow, and prime and superprime borrowers are flocking to the pre-owned market.
Credit reporting company Experian released its latest findings that showed financing for prime (credit scores between 661-780) and superprime (scores between 781-850) hit record highs in the first quarter of this year. In translation, even better-off car buyers are shopping used cars compared to new cars.
The study showed 62 percent of prime borrowers and 45 percent of superprime borrowers financed a used car in the first quarter of this year. Obviously, this translates to fewer new-car sales for automakers rolling out more crossovers, SUVs, and trucks.
To truly demonstrate the lack of parity between new cars and used cars, the average used car was financed for $20,137. The average new car? Shoppers financed $32,187 on average. Used car loans increased $601 compared to a year earlier, and new car loans jumped $733. Used car buyers left dealers with an average monthly payment of $391; new car buyers will pay on average $554 per month, based on the latest data.
The market gets even more competitive when looking at used and new SUVs. Leases being returned to dealers after 36 or 39 months are 2017 models, which often pack many of the popular features buyers want in today’s market. They include Apple CarPlay and Android Auto, active safety technology, and more. Now, wrap those features in an SUV that costs thousands less, and it’s easy to see why used cars are growing in popularity.
There was another worrisome nugget of information in the study, too. Auto loan delinquencies (late by 30 days) rose to 1.95 percent, up from 1.6 percent. However, the figures are still a far cry from the high delinquency rates seen during the Great Recession.