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More prime consumers opt for used cars as subprime loses share

June 28, 2019
As the percentage of prime and super-prime used-car buyers reached an all-time high in the first quarter, the percentage of subprime loan originations fell to a record low, according to Experian’s Q1 2019 State of the Automotive Finance Market Report published in June.
"The trend of more prime consumers entering the used market is one we’ve seen now for several quarters," said Melinda Zabritski, Experian’s senior director of automotive financial solutions. She noted that high leasing rates are driving consumers with stronger credit quality to the larger inventory of late-model used vehicles. 
Subprime used-car buyers, on the other hand, typically finance lower priced, older model vehicles.
The data showed that 62 percent of prime consumers and 45 percent of super-prime shoppers bought used vehicles in the first quarter. The average loan amount for a new vehicle surpassed $32,000 in the quarter, while the average loan amount for a used vehicle was $20,000. On a monthly basis, the average payment for a new vehicle was $554; for a used vehicle, it was $391.
As average loan amounts and average monthly payments increase, vehicle affordability continues to be a top issue for car buyers. "It’s important that lenders and dealers continue to monitor these trends so they can work with car shoppers to help them find the right vehicle with the right financing options," Zabritski said.
Meanwhile, the percentage of loans originated to subprime borrowers for both new and used vehicles slipped to 19.33 percent, down 26 basis points year over year. Including leases in the mix, subprime originations dropped to 17.43 percent, down 11 basis points compared with the year-prior period.
Despite the lows, Zabritski pointed out that there still are a "good volume" of subprime borrowers in the used market. The record lows for subprime consumers can be attributed to a number of factors, she said, including an increase in average credit scores and more prime and super-prime borrowers in the market.