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As the demand for electric vehicles (EVs) continues to grow, consumers are exploring various options to make the switch more accessible and affordable. One option that has been gaining traction is EV leasing, which generally offers flexibility and lower upfront costs compared to purchasing.
According to Experian’s “State of the Automotive Finance Market Report: Q4 2024,” EVs accounted for 19.5% of all new vehicle leases this quarter, up from 11.7% last year and a notable increase from 2.1% in Q4 2020. At a broader level, EVs made up 9.3% of all new purchases in Q4 2024. Of those EVs, 50.1% were leased, meanwhile 38.9% were financed with loans.
Why It Matters
As EVs come off lease in the next few years and enter the used market, credit unions are in a prime position to capitalize on this shift. While they traditionally focus on the used vehicle space and are already well-equipped to provide financing solutions, this influx presents an opportunity to expand offerings and tap into the growing market.
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Despite used vehicle financing declining this quarter to 36.5%, from 38.7% in Q4 2023, we could witness an upward movement as the formerly leased EVs become available for resale, somewhat depending on consumers’ receptivity to used EVs. By staying ahead of the data, credit unions can prepare to offer competitive rates and tailored loan solutions as they explore strategies to recover market share.
Exploring the Overall Automotive Finance Market
The growth in EV leasing, coupled with the shifts in the broader vehicle finance market, underscores the need to respond to changing consumer preferences and financing options. Another important factor to consider is the current distribution of market share among lenders.
A few years ago, credit unions captured a significant portion of market share due to their appealing rates and personalized lending approaches. However, many recently pulled back their assertive approach in the automotive finance sector.
For example, credit unions’ market share for total financing declined from 22.2% in Q4 2023 to 19.4% in Q4 2024. Meanwhile, banks rose to 27.2% this quarter, from 23.8% last year, and captives went from 30.9% to 30.6%.
Digging a bit deeper, credit unions still maintained a significant share of the used vehicle market, however their presence has declined as banks have increasingly taken the lead. In Q4 2024, banks accounted for 28.7% of the used loan market share, up from 26.1% in Q4 2023, and credit unions came in at 27.5% this quarter, down from 29.4% last year. Captives declined from 9.3% to 7.9% year-over-year.
The need for credit unions to stay informed about current trends and what’s to come is crucial as they prepare for the influx of once-leased EVs entering the used vehicle market. By adapting to these changes and benefiting from the increasingly popular fuel type, they can seize the opportunity to regain market share and strengthen their presence in the broader auto finance sector.
Current State of the Used Vehicle Market
As credit unions keep an open mind about the evolving fuel type trends, it’s also beneficial to understand the current reality of the used market – considering prices and interest rates are continuing to level out across the board.
For instance, the average loan amount for a used vehicle dropped $344 year-over-year, reaching $26,468 this quarter. Furthermore, the average monthly payment declined from $535 last year to $525 in Q4 2024 and the average interest rate went from 12% to 11.6%.
When it comes to who is purchasing these vehicles, prime and super prime consumers accounted for nearly 60% of used financing in Q4 2024, with super prime coming in at 22.6% from 20.6% last year, and prime at 37% from 38.5%.
The current dominance of prime and super prime consumers in the used finance space underscores the need for credit unions to enhance their appeal as a top financial choice for a growing and diverse group of used vehicle buyers.
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