Nearly All Auto Lenders Gain a Hair of Share in Q3

Credit unions gained strength in used car lending in the third quarter, while losing share of the number of new car loans and leases, according to an Experian report.

Experian’s “State of the Automotive Finance Market” released Nov. 30 also showed credit unions, banks and captive lenders gained a bit larger share of the number of new and used loans and leases originated in the third quarter than they had in the second quarter.

Each gained about a half a percentage point at the expense of finance companies and buy-here-pay-here lots.

But Melinda Zabritski, Experian’s head of automotive financial insights and the report’s author, said all those players are losing loans and leases to cash.

In the third quarter, 21% of new vehicles were bought with cash, up from 18% a year earlier and a historical average of 15%. About 63% of used cars were bought with cash, up from 59% a year earlier.

“When rates increased, we started seeing more cash,” Zabritski said. “That trend is continuing through the third quarter of this year.”

And for the remainder of lease and loan deals, captive lenders have rapidly increased share over the past year.

Captive lenders have stepped back into automotive lending, taking an ever larger share since the third quarter of 2022, when credit unions peaked with a leading share of 27.3%.

Credit union’s share fell in each of the next three quarters, standing at 22.5% in the second quarter, which placed them third. Credit unions remained No. 3 in the third quarter with 23.1% of the market.

From the second to the third quarter, credit unions continued to lose share in new car financing, while regaining share in used cars.

Credit unions’ share of new car loans and leases was 13.2% in the third quarter, compared with 24.4% a year earlier and 13.7% in the second quarter.

Credit unions’ share of used auto loans was 30.3% in the third quarter, compared with 32% a year earlier and 28.7% in the second quarter.

Credit unions are still well above their median share of about 20% of new and used financing from the third quarter of 2019 through the second quarter of 2022. Banks are down from about 30%, while captives are up from about 26%.

For all lenders, the average new vehicle loan amount was $40,184 in the third quarter, down 3.3% from $41,543 a year earlier. That’s in contrast to the 9.8% price increase from the third quarter of 2021 to the third quarter of 2022.

For used cars, the average third-quarter loan was for $27,167, down 5.3% from a year earlier.

Higher interest rates caused payments to rise, but were tempered by the lower loan amounts and slightly shorter terms.

Average new vehicle payments were $726 per month in the third quarter, up 3.8% from a year earlier, while used car payments rose a bare 0.8% to $533.

“While we’ve seen the average loan amount for new and used vehicles rise over the better part of the last three years, it’s a welcome sight to see average vehicle loan amounts decrease,” Zabritski said. “Once you factor in monthly payments remaining relatively stable despite rising interest rates, the industry seems to be heading in a positive direction, especially with consumers having more options available to them during the financing process.”