The amount of loans and monthly payments in the U.S. continues to break records
The gap between monthly payments for new and used vehicles continues to grow as the average monthly payments reach new heights.
The amount of loans and monthly payments continued to break records, but borrowers don’t seem scary. According to the Experian report on the state of the loan market (State of the Automotive Finance Market) the level of arrears for the period at 30 and 60 days during the second quarter of 2018 decreased.
As the results show, the level of 30-day arrears decreased to 2.11% from 2.2% a year ago, and the debt for a period of 60 days for the same period fell to 0.64% from 0.67%.
“The level of arrears is one of the most indicative parameters for monitoring the condition of the car market. If this trend of decrease continues, this could be an encouraging sign, – said Larisa Gorbenko, Director of marketing for Experian in Russia and CIS countries. – In the future, lenders will be closely monitoring the payment discipline of buyers of cars. Understanding these trends and use data helps the loan organizations to make the right decisions in risk analysis.”
Despite the fact that the level of overdue debt is declining, the economic availability of credit remains in question, since the average loan amount continues to grow in all segments. The average loan amount for new vehicles has increased by more than $700 annually to $30 958 in the second quarter 2018 and the average loan for a used car increased by $520 and $19 708. In this case the monthly payments for new and used vehicles during the quarter reached a record level: the average payment for a new car on an annual basis increased by $20 to $525, and the average payment for a used car for the same period increased by $13 and has reached a level of $378.
Looking at the numbers more closely, lenders can make certain conclusions on the basis of the difference in monthly payments for new and used vehicle, which continues to increase in the second quarter reached $147. For some buyers this gap affects the decision to purchase a new or used car.
According to the report, also frequent requests for loans to credit cooperatives: a credit increase on new cars in credit cooperatives is expressed in the double digits (12.9 per cent), there is also significant overall growth (4,9%), and recorded a share of 21.3% of the total market at the close of the period at the end of the second quarter Among other types of credit institutions the growth was recorded only in captive banks of car manufacturers – 1.2% over the same period.
In addition, compared to last year, credit organizations behave more conservatively, as it continues to decline, the share of loans “sub-Prime” (subprime) and “deep subprime” (deep-subprime) categories. The deep subprime category reached a historic low of 3.54 percent from 3.98% in the second quarter of 2017, the Proportion of categories, subprime and deep subprime taken together is less than 19% of the credit market. As a result, average credit score to get a loan for new and used car continues to rise and reached 655 and 715, respectively.
Other research findings:
• Outstanding balances on auto loans reached a record high value, but growth is slowing: $1,149 trillion in the second quarter of 2018 compared to $1,027 trillion in the second quarter of 2016.
• Leasing decreased slightly year on year, with 30,83% in the second quarter of 2017 to 30.41% in the second quarter of 2018.
• The most common term is a period of 72 months for both new and used cars
• In the second quarter of 2018, the market share owned by banks, decreased to 31.6% from 32.3% in the second quarter of 2017.
• Interest rates have risen for all types of loans except loans on used cars in categories, deep-subprime
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