Customers in the top credit tiers are choosing used vehicles in their highest numbers since the Great Recession, the latest Experian report says, due to an increased availability of late-model vehicles and a growing chasm in new- and used-vehicle pricing. But franchised dealers should take note — more shoppers in these tiers are headed to independent stores for their next used car.
Experian's third-quarter State of the Automotive Finance Market study noted that independent dealerships saw an increase in prime and superprime financing — credit segments that made up more than half of all used-vehicle loans last quarter. Prime customers, according to Experian, have credit scores between 661 and 780. Superprime customers have scores between 781 and 850.
Shares of prime and superprime auto loans originated at independent dealerships leaped in the third quarter, rising 1.88 percentage points and 1.17 percentage points, respectively, since last year at this time. Experian includes companies such as CarMax in its definition of independent.
Franchised car dealerships, meanwhile, lost shares of those loans in the third quarter, as prime loans fell 1.1 percentage points and superprime dipped 7 basis points.
Though credit scores have been rising for all credit tiers, the average credit score of an independent used-car shopper has steadily climbed over the past several years. In the third quarter, the average score was 630, compared with 609 in third-quarter 2015, Experian says. The average score for franchised stores' used-vehicle shoppers dipped slightly from last year, falling to 681 from 683.
Franchised dealers should monitor the competition from used-only stores in their area, and pay attention to the inventory increasingly sought by prime and superprime shoppers. Rather than taking customers in higher credit tiers for granted, franchised dealers should double down on marketing used-car inventory to buyers who have historically purchased new.