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Decline in Auto Loan Growth, Increase in Leasing Origination in 1999: CBA Study

May 16, 2000

Growth in auto loan dollars originated slowed from 31.2 percent in 1998 to 7.2 percent in 1999 while growth in leasing originations increased from 5.7 percent in 1998 to 11.5 percent in 1999, according to the Consumer Bankers Association (CBA) 2000 Automobile Finance Study.

Consistent with relatively flat vehicle sale prices, average loan sizes increased only slightly in 1999. The average new vehicle loan size increased 1.6 percent to $19,813 and the used vehicle size increased 1.8 percent to $14,410, according to the study conducted for CBA by KPMG Consulting.

For new vehicles, captives originated relatively shorter term loans than large banks. In 1999, 39 percent of captive new vehicle loan originations were 48 months or shorter, compared to 21 percent for large banks.

The customer credit profile for both new and used vehicle loans originated changed little from 1998 to 1999. For new vehicle loans, 41 percent of originations had bureau scores of 720 and above, the same percentage as that of 1998. On the low side, 11 percent had scores below 620 (or were unscored), compared to 19 percent in 1998. The average score was 700, compared to 701 reported in 1998.

For used vehicle loans, 34 percent of originations had bureau scores of 720 and above, compared to 35 percent in 1998. On the low side, 16 percent of originations had scores below 620 (or were unscored), down from 17 percent in 1998. The average score was 680, again the same as reported the previous year.

Delinquencies declined considerably in 1999. New vehicle loan dollar delinquencies declined from 2.05 percent in 1998 to 1.57 percent in 1999. Used vehicle loan dollar delinquencies declined from 3.53 percent to 3.17 percent for the same period.

The use of tiered pricing increased among all lender sizes. In fact, the largest gain was among the small lenders sampled, with 80 percent reporting the use of tiering for both new and used vehicle loans, up from 40 percent in 1998. As in prior years, lenders generally reported using four to five tiers for pricing.

Most auto finance providers' Web activities are limited, and only 30 percent of respondents maintained a dedicated Internet staff. For those respondents who do maintain a dedicated Internet staff, the average number of full time employees is 8.6, most of whom are dedicated to decisioning and origination.


Aggregate lease booking ratios improved from 64 percent in 1998 to 67 percent in 1999. The percentage of lessors allowing dealers to approve leases without intervention continued to increase from 50 percent in 1996 to 56 percent in 1999. Lease approval automation declined in 1999 and is used less frequently than loan auto-decisioning.

New vehicle leasing terms continued to lengthen in 1999. The percentage of new vehicle lease originations 37 months or longer was 67 percent, up from 52 percent in 1998. Used vehicle leases were shorter, with only 51 percent being 37 months or longer.

As in prior years, captive finance companies had generally shorter terms than large banks. In 1999, 10 percent of leases originated by captives were 35 months or less, contrasted with 2 percent for large banks.

Fewer leases reached full term in 1999. Of lessors surveyed, 63 percent of units coming off lease in 1998 had reached full term, down from 69 percent in 1997. In 1999, 56 percent of vehicles reaching full term were returned to lessors compared to 39 percent of full term leases in 1998. The average loss for full-term vehicles returned to lessors worsened from $1,185 in 1998 to $1,920 in 1999.

Vehicle leasing experienced improved credit performance in 1999. Accounts delinquent declined from 1.61 percent in 1998 to 1.38 percent in 1999. Accounts repossessed declined from 1.60 percent to 1.28 percent. Net credit losses declined from 0.50 percent to 0.42 percent.

Conducted and analyzed by KPMP Consulting, the 2000 CBA Automobile Finance Study is available at a cost of $225 for CBA members and $400 for non-members. To obtain an order form, visit or call (703) 276-1750.

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