Experian Reports New ‘Norm’ for Loan Terms
SCOTTSDALE, Ariz. – Longer loans with 72-month terms or even longer are becoming the “new norm” in auto finance – including subprime to a growing extent, according to Experian.
“The market is now comfortable in the 75-month terms,” said Melinda Zabritski, senior product director of automotive finance for Experian Automotive, yesterday, during her opening speech at the Subprime Forum here. “In fact, 73- to 84-month increased with some of the highest rates we have seen.”
In Q3 2015, loans in the 73- to 84-month range accounted for 13.9% of used-vehicle subprime loans, and 40.9% new-vehicle loans in subprime. To put that in context, most subprime loans are for used cars; relatively few subprime loans are for new cars, Experian said.
For the industry overall, including all risk tiers, the 73-to-84-month category accounted for 28.8% of new-vehicle loans and 16.1% for used-vehicle loans, Experian said. That was for Q2 2015, the most recent quarter for which Experian has made complete, detailed results available.
“Loan terms have been something that was fascinating to watch,” Zabritski said.
Despite increased loan terms, payments continue to rise, she said. “Part of it is, what consumers purchase has changed.” That is, consumers are financing pricier cars.
Average subprime loan amounts in the period from January to August 2015 climbed to $28,659 for new, and $15,730 for used. Those numbers were up 3% and 1.3% respectively, compared with the same period last year, according to Experian.
