Record-High Prices Continue To Drive Some New-Car Intenders To Used

Record-high loan amounts for new cars and trucks are driving some of the best-qualified borrowers — who could probably get a new-vehicle loan if they wanted one — to buy used vehicles instead, according to Experian Automotive.

“There’s a perception that people who buy new, buy new, and people who buy used, buy used,” said Melinda Zabritski, senior director, Financial Solutions, for Experian Automotive, Costa Mesa, Calif.

“But when you look at the trendline, and you assess the shift in a particular risk band, it makes you question some of the longstanding assumptions,” she said in a phone interview on June 6.

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Specifically, Experian data from the first quarter of 2019 showed an all-time high for the percentage of prime-risk buyers — 61.9% — who got a used-vehicle loan in the quarter. For super-prime borrowers, it was a record 44.8%. The last time those numbers were comparably high was the first quarter of 2009.

Experian Automotive defines the super-prime “risk band” as consumers with credit scores 781 and above; prime, as 661 to 780. For the quarter, the average credit score for new-vehicle loans was 725. For used vehicles, the average was 682. Those numbers have been on the rise the last three years in a row, as auto lenders have generally tightened their standards for approving loans.

Meanwhile, the average amount borrowed also hit record highs for the quarter, for both new and used, Experian said. In the first quarter of 2019, the average new-vehicle loan was $32,187, up 2.3% from a year ago. The average used-vehicle loan was $21,902, up 3.1%.

Tellingly, the gap between the average new-vehicle monthly payment vs. the average used-vehicle monthly payment is also on the rise, to $163 in the first quarter. For the first quarter, the average new-vehicle payment was $554, up 5.9% from a year ago. For used, it was $391, up 5.1%.

Another closely watched statistic, the level of delinquencies, stayed relatively flat in the first quarter vs. a year ago, Experian said. For the first quarter of 2019, 30-day delinquencies represented 1.98% of the outstanding balance, up from 1.9% a year ago. Zabritski said the 30-day delinquency rate was still below the latest cyclical high, at 2.81% in the first quarter of 2009.

I’m a reporter with 25-plus years experience writing about, and working in, the auto industry. After a journalism degree at the University of North Carolina-Chapel Hill

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