Sep 20 2014

US Consumers Rely On Auto Loans At A Record Rate

New York City (Reuters) – A record variety of US consumers are getting loans to buy cars, specifically those buying pre-owned vehicles, according to data released on Wednesday.

In the 2nd quarter, 85 percent of brand-new automobile purchases and 53.8 percent of used car purchases were funded, according to information from Experian Plc (EXPN. L), an information carrier.

That was up 0.5 percentage points and 0.9 percentage points, respectively from the exact same duration in 2013.

In addition, the size of automobile loan quantities and regular monthly payments remained to rise, particularly for made use of vehicles. Since the 2nd quarter of 2013, the typical secondhand automobile loan rose 1.9 percent to $18,258 and the typical monthly payment on such vehicles increased 1.1 percent to $355, both all-time highs.

An increasing number of consumers, specifically those that are credit challenged, are turning to the utilized vehicle market as a sensible alternative to purchase their next vehicle, said Melinda Zabritski, senior director of automotive finance for Experian, in a statement.

Banks were the biggest loan providers to customers buying used cars, financing 35.6 percent of all such purchases, or 0.8 portion points less than the second quarter of last year.

In currentRecently banks have started to focus more on the pre-owned vehicle market as automakers internal funding arms concerned dominate the brand-new vehicle market. Such captive finance business made even more than one out of every two brand-new carauto loan in the 2nd quarter, according to Experian.

Regulators have ended up being more concerned with banks determination to lengthen terms on car loans, provide to borrowers with lower credit scores and give out loans that are larger than cars deserve.

In addition, the United States Department of Justice has begun examining subprime automobile loans that business such as General Motors Cos (GM. N) car financing arm and Santander Customer Holdings USA Inc (SC. N) have actually made and securitized considering that 2007.

However a minimum of in the 2nd quarter, the share of both brand-new car and utilized carloan that went to borrowers with subprime credit scores decreased, according to Experian.

Lenders are still showing cautionary indications when providing to the subprime market and keeping their risk at workable levels, Zabritski stated.

Wells Fargo Co (WFC. N) continued to be the biggest US automobile loan provider in the 2nd quarter with a market share of 5.75 percent, below 5.89 percent a year prior.

Capital One Financial Corp (COF. N) surged past JPMorgan Chase Co (JPM. N) to become the third largest US automobile loan provider after Ally Financial Inc (ALLY. N). The McLean, Virginia-based banks share of the pre-owned automobile market rose from 3.77 percent to 4.20 percent.

(Reporting by Peter Rudegeair; editing by Andrew Hay)