In the fourth quarter, credit unions held the largest percentage of the vehicle finance market for the first time. According to Experian’s State of the Automotive Finance Market Report: Q4 2022, credit unions accounted for 26.85% of all vehicle financing in the quarter, comprising the largest share of vehicle financing across the lending marketplace. Taking leasing out of the equation, credit unions make up nearly 30% of all vehicle loans, at 29.12%. That was followed by banks at 27.35%, captives with 19.53%, and finance companies at 12.67%.
“The biggest driver of credit union growth was lower interest rates, for both new and used vehicle financing. Even as rates overall have increased, credit unions have managed to be a full percentage point lower than other lenders,” said Melinda Zabritski, Experian’s senior director of automotive financing. “In addition to lower rates, we continue to see fewer incentives from captive lenders, giving credit unions the opportunity to grow market share in the competitive rate environment. Having a broader understanding of data like interest rates can help lenders and dealers make strategic decisions and serve consumers effectively.”
During the quarter, the average interest rate offered by credit unions for new vehicles was 5.49%, with captives slightly lower at 5.45%. Banks clocked in at an average interest rate of 7% for new-vehicle loans, while buy-here-pay-here was 6.06%, and finance companies offered 9.38%. On the used side of financing, credit unions offered the lowest rate on average at 7.03%, followed by captives at 9.25%, banks at 9.34%, buy-here-pay-here at 11.2% and finance companies at 19.17%.
Average Loan Amounts Start to Level Out
Zooming out to look at the market overall, increases in average loan amounts began to taper off in the quarter. The average new-vehicle loan amount increased 4.04% year-over-year to $41,445—a much smaller year-over-year increase than the fourth quarter of 2021, when it was 12.46%. The difference was even more notable for used vehicles, with an increase of only 1.38% on the average loan amount year-over-year reaching $27,768, compared to a 20.96% increase in the fourth quarter of 2021.
Average loan terms also leveled out in the fourth quarter, with the average new-vehicle loan term decreasing from 69.64 months in the fourth quarter of 2021 to 69.44 months last quarter. Used-vehicle loans saw a slight uptick in length, clocking in at 68.01 months in the quarter, up from 67.35 months in the fourth quarter of 2021.
“Seeing attributes like loan amount growth and average terms beginning to normalize is a positive sign the industry is moving in the right direction,” Zabritski said. “It’s important to pay attention to all attributes to have a holistic picture of the industry.”
Additional Findings of Q4
- Overall loan balances continued to grow, from $1.3 trillion in Q4 2021 to $1.4 trillion.
- Leasing saw a year-over-year decrease from 23.95% to 17.21% from Q4 2021.
- Prime and super-prime comprised 66.5% of all vehicle financing, up from 64.98% in Q4 2021, while subprime declined from 16.38% to 15.57% year-over-year.
- The share of financing made up by sedans grew from 17.69% in Q4 2021 to 18.26%.
- Honda remained the top leased make at 12.07%, followed by Chevrolet at 9.17% and Toyota at 8.85%.
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