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Study shows an increase in the number of consumers financing electric and hybrid vehicles
SCHAUMBURG, Ill .– (BUSINESS WIRE) – Although affordability remains a concern in the auto industry, Experian has found that consumers with strong credit are turning away from used vehicles to vehicle financing. new. According to Experian Q4 2020 State of the Automotive Financing Market report, 44% of super-privileged consumers chose used vehicles in the fourth quarter of 2020, up from 47.03% in the fourth quarter of 2019. Similarly, 60.38% of privileged consumers chose used vehicles, compared to 63 , 75% over the same period last year.
“The events of 2020 have disrupted the auto industry and we have seen some consumers move away from models that have been cemented in previous quarters, such as opting for used vehicles,” said Melinda Zabritski, senior director of Experian automotive financial solutions. “While we can probably attribute some of the change to stimulus controls, deferral incentives and tight inventories, we are in uncharted territory. Leveraging the data to better understand patterns and trends will help lenders and dealers alike. to make the most strategic decisions in the days to come. ”
Overall, Experian has seen similar trends and patterns to previous quarters. The total number of origins for prime and super prime consumers increased in the fourth quarter of 2020, reaching 44.24% and 22.13%, respectively. Conversely, total originations are down in the subprime segments: subprime originations represent 14.35% and deep subprimes fall for the first time below 2% to 1.98%.
Electric and hybrid vehicles increase their share of financing
Electric and hybrid vehicles have steadily gained in popularity in recent years. In the fourth quarter of 2016, electric and hybrid vehicles accounted for less than 3% of funding, but this figure has more than doubled in the past five years. In the fourth quarter of 2020, electric and hybrid vehicles represented 6.72% of automotive financing.
Taking a closer look at what is funded, Toyota leads with the largest electric and hybrid vehicle market share at 38.57%, followed by Tesla at 25.82%. The top five are completed by Honda (8.4%), Lexus (5.47%) and Ford (3.72%). The Tesla Model Y was the most popular electric or hybrid model funded in Q4 2020, at 13.3%, with the RAV4 ranking number two at 11.19%.
While EVs tend to have a higher average monthly payment than hybrids, both saw slight increases in Q4 2020. The average monthly payment for EVs increased from $ 671 in Q4 2019 to $ 689. in Q4 2020, while hybrids fell from $ 509 to $ 529 over the same period.
Average loan amounts and monthly payments continue to increase
Overall, average auto loan amounts and monthly payments continue to increase, possibly due to continued consumer preference for larger vehicles such as pickup trucks and SUVs. In fact, more than 50% of new vehicles financed in Q4 2020 were small and medium-sized SUVs.
The average loan amount for a new vehicle increased by almost $ 2,000 year over year to reach $ 35,228 in the fourth quarter of 2020, while the average monthly payment increased by $ 13 for reach $ 576 over the same period. Likewise, the average loan amount for used vehicles increased from $ 20,824 to $ 22,467 year over year, while average monthly payments increased by $ 18 to exceed $ 400 for the year. first time, reaching $ 413 in Q4 2020.
“With the increase in average loan and payment amounts, affordability will continue to be an important topic to pay attention, especially as market conditions continue to develop in 2021,” Zabritski continued. . “To move the industry forward, lenders and dealers need to rely on data to ensure they have the right options to meet the needs of consumers.
Additional findings for the fourth quarter of 2020:
Total open auto loan balances grew 2.8% year-over-year, reaching $ 1.27 trillion in the fourth quarter of 2020.
The average loan term continued to increase for new and used vehicles in the fourth quarter of 2020, to 69.68 months for new vehicles and 65.58 months for used vehicles.
Interest rates fell in Q4 2020. The average interest rate for a new vehicle loan fell from 5.25% in Q4 2019 to 4.31% in Q4 2020, while the average interest rate used vehicles rose from 9.05% to 8.43% over the same period. .
Captive lenders saw the strongest growth in the fourth quarter of 2020, rising from 26.22% in the fourth quarter of 2019 to 30.14% in the fourth quarter of 2020.
To see the whole Q4 2020 State of the automotive financing market webinar report, visit https://www.experian.com/automotive/automotive-webinars.html.
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