Car buyers with the best credit records are shifting gears, with more of them taking out loans for used vehicles instead of new ones. That's one of the findings of the latest report on auto loans by Experian Automotive.
"One of the biggest trends we continue to see is the shift into used vehicles by customers with excellent credit," said Melinda Zabritski, senior director of automotive finance for Experian.
In the second quarter of this year, 43.3 percent of consumers with the highest credit rating who took out an auto loan, did so to buy a used vehicle. That's 10 percent more than the same time a year ago.
Meanwhile, 59.9 percent of consumers with prime credit ratings (one grade below super prime) borrowing to buy a car, truck and SUV in the second quarter, also chose a used vehicle. That's a 6.6 percent increase over the second quarter of 2015.
Why are more consumers with the highest credit scores turning to used vehicles instead of buying new ones? Perhaps it's because new vehicle prices have surged to new highs with the average transaction price in August topping $34,000 according to Kelley Blue Book.
As a result, the average amount borrowed for a new vehicle has steadily climbed higher, hitting $29,880 in the second quarter, according to Experian.
By comparison, the average auto loan for a used vehicle was more than $10,000 lower at $19,101.
"As vehicle prices continue to rise, savvy consumers are looking for ways to control costs. That appears to be pushing more customers toward used vehicles," Zabritski said.
In fact, Experian said used vehicles accounted for 55.6 percent of all auto loans written in the second quarter, a new record high.
The quarterly report on auto loans showed a continuation of many of the trends that have anchored the growth in auto sales since 2009.
For example, the average monthly payment for a new car auto loan was $499, up $16 compared to the second quarter of 2015.
At the same time, used vehicle buyers' monthly payment climbed above $400 to an average of $404, according to Experian.
Finally, Experian said there was an increase in 30 and 60 day delinquencies on auto loans where consumers failed to make their monthly payments. 2.22 percent of all auto loans were 30 days delinquent in the second quarter, up from 2.16 percent in 2015. 60 day delinquencies climbed from 0.56 percent of all auto loans in the second quarter of 2015 to 0.62 percent in the second quarter of this year.
"Subprime loans have actually dropped as a percentage of the total market. That, combined with only a slight uptick in delinquencies, it's clear the sky is not falling," said Zabritski.
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