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.
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Comments
The hash truth is new vehicles are getting more and more difficult to buy for the average buyer.
Used models present a chance to own a nearly new car at a lower price so this trend will continue.
If you note due to demands truck, CUV models and SUV models are all enjoying high demand and resale prices. Sedans are seeing the bottom fall out. I just looked at a 4 year old Chrysler 300 that was $10K while I sold my older Terrain for $6K
You’re gonna need GAP ins. on that.
I was looking for a more recent model Cruze for my mom who wanted something smaller than her 2008 Impala the past 5 months and literally every single decent 2015-2017 LT sedan with the required convenience pkg was sold before we could even look at it. Most the very next day. In fact used sedans under say 20K seem to be few and far between in any dealership I have visited the past few months. So with that I cry bogus to cars no longer selling. It’s expensive undesirable sedans that are failing. Instead if people are spending the big bucks they are getting vehicles like trucks and SUV’s that are to them more capable and “worth” the extra costs.
Nice to read an article that you can make sense out of. Does this all mean new vehicle prices should drop some while used vehicle prices rise?
While this trend has been going on for quite some time, especially in the NW which is a ‘used car market’ and always has been, it is now increasingly manifesting itself in typical new car markets.
In my area, there are a lot of 10 to 25 year old(and older) vehicles still being used as daily drivers. And a lot of them are in great shape.
And @ Alex, another reason why owners of perfectly good and still desirable Gen-5 Camaro’s are reluctant to upgrade to a Gen-6. Why when you have a paid for or nearly paid for perfectly good Camaro in the garage with insurance going down yearly would you throw that all away and further encumber yourself.
Most people will never appreciate the handling dynamics the Gen-6 offers so where is the incentive to upgrade. Just to get new paint. Not enough for many.
A used North American model is much better than a new import, no matter the prices. My Dad and I had bought several used GM vehicles, including his fully equipped 1967 Cutlass Supreme Limited that he bought in 1970 for just $1,000 because the trunk was bent in a rear collision. I drove that Cutlass home (I couldn’t see through the rear view mirror at all), but in a month he had it fixed, and we drove it until 1975 when he traded it in for a used 1974 Chevy Malibu. I drove the Cutlass several time to college and back between 1973 and 1974.
I had three used GM vehicles, including a 1984 Oldsmobile Cutlass Ciera that I drove until 2001 (26 years!) which I later sold to a neighbor. After my income improved, I bought my first new car: a 1995 Buick Regal Limited that I drove until 2016 (21 years) and sold it to a friend who still drives it. For my wife I bought a 2009 Chevy Equinox which she still drives.
So for all who need a great car at a lesser price, a used North American brand vehicle (assembled in U.S., Canada , or Mexico) is the better buy, since that money stays in the U.S. Those cheap imports are disposable, just like toilet paper: use once and throw it away!
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You can drive Toyota Camry into the year 3000. Way after American brand cars engines fail. I’m not a Toyota fan as I never owned one nor care for the lack of “excitement” from the brand, but if you want cheap, reliable transportation then there is literally no better option. There is a reason why most taxis are Camrys.