Affordability pressures, driven by rising new-vehicle transaction prices, forced buyers to get creative with financing options in the second quarter, though consumers shouldering higher-than-usual costs aren't expected to abandon their financial obligations.
Experian's latest industry report on auto lending indicates that loan delinquencies remain relatively flat, even while customers set records when it comes to stretching loan terms and opting for used vehicles.
Melinda Zabritski, Experian's senior director of automotive financial solutions, said consumers are chasing smaller monthly payments, but the real test of affordability will be whether they start downgrading to smaller, less expensive vehicles.
"We fundamentally haven't seen a difference in the types of cars these consumers are purchasing," Zabritski told Automotive News. "If we do begin to see pressure around payments and delinquency, that's where we may be seeing a shift in the types of cars people buy."
U.S. new-vehicle sales rose for the second straight month in August but are down an estimated 0.3 percent for the year, according to the Automotive News data center.
The report also said:
- Prime and superprime consumers — those with credit scores at and above 661— made up more than 57 percent of used-vehicle finance customers during the second quarter, an all-time record-high.
- The average new-vehicle loan term increased to 69.17 months, and used-vehicle loan terms reached 64.82 months, both records.
- Delinquency rates moved — barely. Thirty-day delinquencies dipped 1 basis point to 2.11 percent year over year, while 60-day delinquencies rose 1 basis point to 0.65 percent in the same time frame.
- Total automotive loan balances reached $1.197 billion in the second quarter.