Trends in Automotive Finance: Insights from Experian's Q1 2024 Report
Experian's recent State of the Automotive Finance Market Report for the first quarter of 2024 offers an insightful look into the changing landscape of auto financing. The report reveals trends shaping the industry, from delinquency rates to shifts in vehicle financing preferences, providing a comprehensive overview of current market dynamics.
Delinquency Rates: A Comparative Analysis
The report indicates a slight increase in 30 and 60-day delinquency rates compared to the previous year. Specifically, the 30-day delinquency rate rose from 2.34% in Q1 2023 to 2.72% in Q1 2024, while the 60-day delinquency rate increased from 0.76% to 0.88%. However, when compared to pre-pandemic levels in Q1 2019, these figures show a more stable scenario, highlighting how the market has adapted to post-pandemic economic conditions.
Impact of Vehicle Costs on Financial Portfolios
The rise in delinquency rates can be partly attributed to the increasing cost of vehicles, which is impacting the financial health of portfolios. According to Experian, the percentage of outstanding balances that are 30 days delinquent has risen to 2.71%, a significant increase from previous years. Likewise, the balance of 60 days delinquent accounts has reached 1.03%, indicating a growing financial burden on borrowers.
Rebound in New-Car Financing and Leasing
Experian has pointed out a significant trend towards increased financing and leasing of new vehicles, as automotive inventories have become more stable. Captive lenders' market share in new vehicle financing has risen to 61.75%, the highest level since 2010. This shift is primarily driven by the availability of new models and attractive manufacturer incentives.
The Resurgence of New-Car Leasing
The report also indicates a significant increase in new car leasing, which rose to 24.12% from 19.33% the previous year. This trend is supported by the decrease in average monthly lease payments to $595, making leasing more appealing to consumers.
The Popularity of SUVs and Electric Vehicles
SUVs are currently dominating the leasing market, with popular models such as the Honda CR-V and Tesla Model Y leading the way. Electric vehicles (EVs) are also gaining momentum, making up 8.56% of all new vehicle financing. Notably, there has been a significant increase in EV leasing, accounting for 35.22% of EV financing, up from just 12.27% the previous year.
Top Leased EV Models
The Tesla Model Y continues to be the most popular leased EV, followed by other models such as the Tesla Model 3 and the Rivian R1S. This increase in leasing reflects a growing consumer interest in EVs, fueled by the introduction of several new models and improved tax incentives.
Financial Trends and Consumer Behavior
Experian's report sheds light on broader financial trends by noting that the average financed amount for new vehicles has slightly decreased, indicating a cautious approach from consumers. However, despite lower financing, average monthly payments have slightly increased due to rising interest rates.
Shifts in Market Shares
The report outlines changes in market shares among financing institutions. Captives have significantly increased their share, while banks and credit unions have experienced a decline. This shift could indicate a preference for financing options closely associated with automotive manufacturers.
The Evolving Auto Finance Landscape
Experian's Q1 2024 report provides valuable insights into the automotive finance market. It highlights key trends and shifts in consumer behavior. As the market adapts to post-pandemic realities and evolving economic conditions, these trends offer crucial data for industry stakeholders to make informed decisions.
For a more detailed analysis and additional information, viewers are encouraged to explore Experian's on-demand webinar, which offers further context and expert commentary on these findings.
