Experian’s Melinda Zabritski reveals trends from the Q2 State of the Automotive Finance Market report

The auto finance market is returning to pre-pandemic levels, according to Experian’s Q2 State of the Automotive Finance Market report. So what does this mean for the industry overall? On today’s show, we’re pleased to welcome Melinda Zabritski, Senior Director of Automotive Financial Solutions for Experian. Melinda serves as Experian’s primary analyst for key automotive finance trends.

The Experian State of the Automotive Finance Market is an industry report that provides insights into the auto finance space. They primarily review how consumers are purchasing and what they’re purchasing. They also explore who’s doing the financing and credit trends.

Zabritski says they compare the quarter to prior years. She says by no means Q2 of last year was a normal quarter. They did start to see sales recover in the second part of Q2 of last year. There were some interesting trends, such as a surge in full-size pickup truck financing which drove up loan amounts and extended terms. This year’s loan amounts, payments, and terms are consistent with pre-pandemic numbers. Compared to 2019, there was year-over-year growth of nearly 14% for new vehicles and about 2½% for used vehicles.

Used vehicles saw a spike in valuation, and that drove up loan amounts and monthly payments. Zabritski says they’ve hit record highs for both of those. Vehicle values were up $5,000 dollars, that’s about a 25% increase. The average loan amount hit a high of $23,000 dollars. The monthly payments for used vehicles also hit a record high of $430 a month.

Consumer preferences have changed over the years, says Zabritski. Five years ago, cars made up about 40% of what we purchased. Today, cars are less than 25% and SUVs are approaching 60%. She says, we shifted to larger, more expensive vehicles and they carry higher loans. One of the benefits for those higher values, your trade-in is worth more now. Zabritski says when the prices do level out again, we should expect to see a softening in the values for used vehicles because the demand won’t be as high.

Leasing hasn’t recovered from the point it was pre-pandemic. Zabritski says, over the years, leasing had grown to be about 35% to 36% in new-vehicle financing. She says about 1 in 4 cars are being leased. Currently, leasing is around 25% to 26%. She thinks with low inventory and the demand for used vehicles, consumers are looking for other choices.

Zabritski ends the conversation by sharing what dealers should do for the balance of the year. She says, dealers should stay on top of the trends and keep aware of the data and what’s happening in the industry. Be aware of the affordability aspect to help consumers make the best decision and guide them to the vehicle that best meets their lifestyle and budget needs.

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