Experian’s State of the Automotive Finance Market Q1 2023 has found that some new vehicle shoppers opted for shorter auto loan terms in the first quarter. On this episode of CBT Now, host Jim Fitzpatrick is joined by Melinda Zabritski, senior director of automotive financial solutions for Experian, to discuss the report’s findings and what they mean for the automotive industry.
Although long-term auto loans are still present in the market, Zabritski notes that rising interest rates have pushed many consumers to take shorter terms to save money. Other factors, such as 48-month manufacturer incentives, have contributed to this trend as well.
These auto loan shifts have also led to an increase in the number of customers paying cash for their vehicles. “One of the things we have seen, especially on new cars again, is more cash,” notes Zabritski. “We used to normally only see about 15% of cash in the market, and now we’re over 20%.” However, this uptick may not be entirely unexpected. Since interest rates are so high, customers who can afford to buy their car outright are incentivized to do so.
While auto loan terms underwent changes in the first quarter, loan amounts became more stable. This is likely the result of increased OEM output. “As inventory balances out, and lots have more supply, that’s helped bring some of those loan amounts down,” Zabritski remarks. Renewed vehicle production has thus slowed the pace of rising car prices, offering some small relief to financing customers.
Although car buyers are struggling to afford auto loans, Zabritski notes that lenders and buyers are still following anticipated patterns. “There’s been some share-shifting,” admits Zabritski. “We’re starting to see captives pick up more share on the new vehicle side, and of course seeing some banks pull back from the market…but luckily, the trends have been very consistent.”