Experian has released its Q4 2019 State of the Automotive Finance Market Report, which found that many of the trends in the automotive market have steadily continued. These trends include high loan balances, delinquency trends, market share increases, and a higher preference for longer term loans. The report also found that prime consumers choosing financing for used vehicles instead of new ones has passed 50 percent, which is the highest it’s been since a decade ago in 2009.

Experian determined that financing of used vehicles by super prime consumers has jumped 0.74% since Q4 of 2018, ending up at 13.29% in Q4 of 2019. Consumers are still mainly choosing pickups (15.09% of financing) and crossovers (15.07% of financing), which Tom Gregg of Vehicle Acquisition Network states is likely due to “overall functionality and versatility as well as a slew of improvements the industry has made over the past few years.”

Q4Loan balances remain high, totaling $1,229 trillion in Q4 2019 as opposed to $1,178 trillion in 2018 and $1,129 trillion in 2017. Consumers may be opting for used vehicles because of the stark price contrast between those and new vehicles, seeing as loans for new vehicles average out to $32,797 as opposed to $20,554 for used ones. There is also the fact that many of the available used cars are now later models with updated features (e.g. backup cameras, lane assist, etc.) as opposed to models manufactured several years ago.

Melinda Zabritski, who works in Experian’s automotive financing sector, stated that, “As consumers look at the options available, selecting a used vehicle can be the best fit for their budgets, while not compromising the features they’re looking for.” Ultimately, auto shoppers are looking for a good deal on a vehicle that also has updated technology and safety features regardless if it means buying new or used.

There is always the concerning question of whether or not consumers will be able to make all of their payments when they are due, especially seeing as an Investopedia article reported that “TransUnion estimated that the average auto borrower had a balance of around $18,500” in Q4 2019.” However, Experian reported that most lenders saw either a decrease or stability in 30- and 60-day delinquency rates, which are still considered high but “aren’t big enough to threaten the entire U.S. economy,” according to popular economist Douglas Holtz-Eakin. Experian also determined that loan balances are trending to be higher throughout the southern U.S. compared to the Midwest.

Monthly payments have continued to rise but not as drastically as we have seen in the past. Experian notes that these small increases “were aided by a reduction in average interest rates, which were 5.76 percent for new and 9.49 percent for used in Q4 2019.” Shifting to used cars that are not as pricey can help keep the average monthly payment lower year-over-year.

Increasing credit scores have also contributed to the overall growth of the automotive industry. The average credit score for new and used vehicles in Q4 2019 were 719 and 661, respectively. Consumers are opting for longer loan terms and the average difference between loans and leases is $93 monthly. Banks saw an increase in market share as well, increasing 2.02% throughout the year.

Experian also noted that financing has also increased in new vehicles, as “prime consumers comprised more than 72 percent of new vehicle financing in Q4 2019.”

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