The industry smashed several records in the first quarter thanks to high new-vehicle prices, but stretching terms and leasing weren’t the only ways consumers sought payment relief.
The first quarter provided a good lesson in the principle of causation, with the continued rise in new-vehicle pricing causing three closely-watched loan attributes to reach new highs in 2016’s opening quarter. The net effect is that consumers will be paying more per month and will be doing so over a longer period of time.
Reaching new highs was the average finance amount and monthly payment for a new vehicle, with the prior surpassing the $30,000 market for the first time ever at $30,032. The latter increased by $15 to $503.
But the continued rise in new-vehicle prices did more than push several loan attributes to record levels. It also caused consumers to explore alternative financing options, with leasing continuing to serve as a viable alternative for payment-conscience car buyers. In fact, leasing accounted for a record 31.1% of all new-vehicle transactions in the first quarter, with credit-worthy consumers able to secure a monthly lease payment that averaged $100 less than the average monthly payment for a new-vehicle loan.
The following is a look at some of the trends that shaped the auto finance industry during the first quarter of 2016.
A New High
The big news coming out of the first quarter was the industry’s total balance of open automotive loans, which increased 11.1% from a year ago to $1.005 trillion. This was the first time the industry surpassed the $1 trillion mark, with much of that growth fueled by finance companies. That segment’s total outstanding balance increased 25.6% from a year ago to $170 billion.
Credit unions posted the second biggest increase, with the segment’s outstanding balance increasing 15.9% from a year ago to $249 billion. Outstanding balances for banks increased 7.9% from a year ago to $244 billion, while captive finance companies increased their outstanding balances by 6.7% to $343 billion.
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Author: Digital Dealer
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