With consumers increasingly returning to dealerships looking to ride away in a new vehicle, financing is reaching levels it has not touched in almost 15 years
According to Experian’s State of the Automotive Finance Market Report: Q1 2024, banks and leasing companies affiliated with car manufacturers saw the share for new vehicle financing jumping to 61.8 percent, its highest level since 2010. Meanwhile, banks declined to 20.7 percent from 23.4 percent year-over-year and credit unions dropped to 9.9 percent from 17.0 percent over the same period.
“The return of new vehicle inventory has had a ripple effect across the automotive finance market,” said Melinda Zabritski, Experian’s head of automotive financial insights in a press statement with the releaes of the report. “Not only are we seeing in-market shoppers transition away from the used vehicle market but we’re starting to see the resurgence of leasing.”
New Vehicle Market
With inventory in Q1 2024 rising, new vehicle leasing was recorded at 24.1 percent, up from 19.3 percent in Q1 2023. This was helped in part by the average monthly payment for a new lease dropping $7 from last year to $595 for the first three months of 2024.
SUVs comprised the majority of the top leased vehicles to begin 2024, with the Honda CR-V at 3.1 percent and Tesla Model Y at 2.7 percent. Those two model were followed by the Nissan Rogue (2.4 percent), Chevrolet Equinox (2.2 percent), and Honda Civic (2.0 percent) to round out the top five.
The average loan amount for a new and used vehicle both decreased by just under $500 from last year —$40,634 for a new vehicle and $26,073 for a pre-owned vehicle.
Interest Rate Impact
But those declines were offset by rising interest rate. For a new vehicle, interest rates now average 6.7 percent, up from 6.6 percent the previous year; for a used vehicle it was 11.9 percent, up from 11.4 percent over the same period.
As a result, the average monthly payment for a new vehicle increased $3, reaching $735, and the average monthly payment for a used vehicle was up $2 at $523.
Among other finding in the report:
- Prime and super prime borrowers accounted for nearly 69 percent of the total finance market;
- Captives comprised 31.4 percent of total vehicle finance market share this quarter, up from 25.9 percent last year. Banks decreased to 25.1 percent from 26.0 percent year-over-year and credit unions declined from 25.2 percent to 20.1 percent in the same time frame;
- New SUV registrations continue to grow at 64.3 percent in 2024, up from 61.7 percent last year. Sedans declined to 15.5 percent from 16.5 percent over the same period; and
- 30-day delinquencies increased to 2.7 percent in Q1 2024, and 60-day delinquencies reached 0.9 percent this quarter.
EV Market
As for the electric vehicle (EV) sector, it accounted for 8.6 percent of all new vehicle financing in Q1 2024 and leasing jumping to 35.2 percent of EV financing in Q1 2024 from 12.3 percent the previous year.
The top three leased EV models in the first quarter were Teslas: Model Y at 39.3 percent, Tesla Model 3 at 11.9 percent and Model X at 3.7 percent. Rivian R1S (3.0 percent) and Volkswagen ID.4 (3.0 percent) were the next two in the top five.
“With more manufacturers rolling out a diverse range of EV models and a wider availability of tax incentives, we’re seeing consumers lean into the EV market, particularly with leasing,” Zabritski continued. “As technology evolves and infrastructure continues to develop, it’ll be interesting to see the buying preferences for these consumers once they come off lease.”
