{"id":392580,"date":"2020-12-03T08:04:00","date_gmt":"2020-12-03T13:04:00","guid":{"rendered":"http:\/\/www.marketnewsdesk.com\/?p=392580"},"modified":"2020-12-03T08:04:00","modified_gmt":"2020-12-03T13:04:00","slug":"30-and-60-day-delinquency-rates-improve-in-q3-2020-as-the-automotive-industry-continues-to-rebound","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/30-and-60-day-delinquency-rates-improve-in-q3-2020-as-the-automotive-industry-continues-to-rebound\/","title":{"rendered":"30- and 60-day Delinquency Rates Improve In Q3 2020, As the Automotive Industry Continues to Rebound"},"content":{"rendered":"

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30- and 60-day Delinquency Rates Improve In Q3 2020, As the Automotive Industry Continues to Rebound<\/b><\/p>\n

Despite smaller percentage of financed vehicles, outstanding loan balances grew 2.8% year-over-year to more than $1.2 trillion<\/i><\/p>\n

SCHAUMBURG, Ill.–(BUSINESS WIRE<\/a>)–
\nThroughout the pandemic, the automotive industry has been one of the reference points in assessing the recovery, and according to findings from Experian\u2019s Q3 2020 State of the Automotive Finance Market <\/i>report, the automotive sector continues to show positive trends.\n<\/p>\n

\nPrior to the pandemic, delinquency rates were considered a barometer of health for the automotive finance market, and this continues to be true today. According to the report, 30- and 60-day delinquency rates improved in Q3 2020, reaching 1.56% and 0.51%, respectively. Comparatively, a year ago, the 30-day delinquency rate was 2.25% and the 60-day delinquency rate was 0.75%.\n<\/p>\n

\n\u201cWhile the decline in 30- and 60-day delinquency rates is a positive trend for the industry, particularly with some of the accommodation programs coming to an end, we do need to consider the impact these programs have had on consumers,\u201d said Melinda Zabritski, Experian\u2019s senior director of automotive financial solution. \u201cSome consumers likely leveraged financial assistance programs to manage through hardship, so it\u2019s important for lenders to keep a close eye on how delinquency rates evolve over the coming quarters. Nonetheless, the improvement is a positive sign for the country\u2019s economic recovery.\u201d\n<\/p>\n

\nBeyond influencing consumers\u2019 ability to manage monthly payments, the pandemic also impacted sales volume. However, despite fewer vehicle sales, outstanding loan balances still grew 2.8% from a year ago, reaching $1.2 trillion. This also comes at a time where a smaller percentage of vehicles are being financed. The percentage of new vehicles with financing was 82.43% in Q3 2020 compared to 86.99% the previous year. Similarly, the percentage of used vehicles with financing was 33.71% in Q3 2020 compared with 39.79% over the same period. It is important to note, the drop in the percentage of vehicles with financing can also be attributed to an increase in cash transactions.\n<\/p>\n

Prime consumers shift back to used vehicles<\/b><\/p>\n

\nDuring the first few months of the pandemic, automakers offered new vehicle incentives to improve sales. As a result, we saw prime borrowers opt for new vehicles, reversing a trend we observed in previous quarters. With fewer incentives offered in Q3 2020, a higher percentage of prime borrowers shifted back to used. Prime and super prime borrowers made up 55.3% of used vehicles financed during the quarter, a new high for used vehicle lending.\n<\/p>\n

\nThe shift back to the used vehicle market is likely driven by continued affordability conversations. Both the average new and used vehicle loan amounts saw increases in Q3 2020. The average loan amount for a new vehicle increased more than $2,000 over the previous year, reaching $34,635, while the average loan amount for a used vehicle saw a $945 increase to $21,438 over the same period. The increases in new and used loan amounts could also be attributed to consumer preference, with consumers leaning toward larger, more expensive vehicles. Small SUVs were the most purchased vehicles, making up 26.01% of loans in Q3 2020, followed by mid-sized SUVs at 24.15%.\n<\/p>\n

\nDespite the increases in average loan amounts, the increases in average monthly payment weren\u2019t as sharp. In fact, the average new vehicle payment increased $11 year-over-year, reaching $563 in Q3 2020, and the average used vehicle payment increased $6 to $397, over the same period. While the average loan amount for new and used vehicles saw significant increases, the smaller uptick in average monthly payment is due to an increase in loan terms and lower interest rates. The average loan term for a new vehicle increased slightly to 69.68 months in Q3 2020, up from 68.98 months, while the average loan term for used vehicles increased from 64.49 months to 65.15 months. The average interest rate for a new vehicle loan saw sharp decrease from 5.38% in Q3 2019 to 4.22% in Q3 2020, while the average interest rate for a used vehicle dropped from 9.09% to 8.43% over the same period.\n<\/p>\n

\n\u201cWith affordability still top of mind, particularly during the pandemic, lower interest rates have certainly helped consumers keep monthly payments at a manageable level,\u201d Zabritski continued. \u201cAs the market evolves and financial situations shift, it\u2019s important for lenders and dealers to stay close to the trends and make strategic decisions that help keep the industry moving forward and consumers in their vehicles.\u201d\n<\/p>\n

\nAdditional findings for Q3 2020:\n<\/p>\n