All posts by Melinda Zabritski

Nowadays, whenever you hear news about the automotive industry, a negative tone tends to pop up. Whether it’s the increase in lending to subprime consumers, or the lengthening in loan terms, the stories lead one to believe that the industry is headed toward another “bubble.” However, that’s not necessarily the case. When we look at the data, the automotive finance market actually demonstrates a strong industry as a whole. Yes, it’s true that subprime lending is up. But, lending has increased across all risk tiers. In fact, loans to super prime consumers have actually seen the largest increase in volume compared to last year, approximately 8.5 percent. To take it a step further, the market share of loans to subprime consumers has decreased from a year ago. At its bare bones, what it means is that consumers are not only purchasing cars, but they are taking out loans to do so. Furthermore, given the percentage of loans extended to each risk tier, we see that lenders have not opened up their portfolios to increased risk. Both of which are positive indications of a strong market. We’ve also seen a steady increase in the length of loan terms. However, before anyone comes to any rash conclusions, it’s not as ominous a sign as it may seem. As cars and trucks have become more expensive to purchase, the easiest way for consumer to keep their monthly payments affordable has been to extend the life of their loans. That said, it’s critical for consumers to understand that by taking out a longer loan, they may need to hold onto the vehicle longer to avoid facing negative equity should they trade it in after a few years. An alternate route many consumers have taken to keep their monthly payments affordable has been leasing. In the first quarter of 2015, we saw leasing account for 30.2 percent of all new financed vehicles – its highest level on record. At the end of the day, consumers are continuing to purchase vehicles and that’s a positive sign for the industry. By gaining a deeper understanding of current automotive financing trends, lenders will be able to use the data and insights to their benefit by better meeting the needs of the marketplace and mitigating the risk of their portfolios. And if they do that, the good times can continue to roll for the industry.

Every time I turn on my television, look out my window or drive into the office, I always see hybrid or electric vehicles on the road. These days it seems like almost everyone is going green. With all the alternative-powered vehicles out there, you’d think that the market is simply booming, right? Would you believe me if I told you that the percentage of newly registered alternative-powered vehicles in 2014 actually declined from the previous year? It’s true. With this revelation, we actually took a deeper look into the alternative-powered vehicle market to see what else we can discover. Here’s what we found: Did you know that consumers who buy “Green” vehicles, purchase them in cash at a higher rate than those that buy more traditional models? Again, it’s a fact. The point is, there are many stereotypes and misnomers about alternative-powered vehicles, as well as the consumers who purchase them. But, just as there are hundreds of stereotypes, there also is an abundance of data to help confirm or reject them. At Experian, we’re committed to using our data for good by providing information into the market to help dealers, manufacturers and consumers better understand the environment we live in – whether we are talking broadly about what metal is moving or more specifically providing actionable insights into who is “going green”. For instance, consumers purchasing an alternative-powered vehicle tend to be a lower credit risk than those purchasing a traditional model. Nearly 83 percent of consumers who purchased a “Green” vehicle fell within the prime credit category, while the same could only be said for 71.5 percent of consumers who purchased gas-powered models. Additionally, of the top five alternative-powered vehicle models in 2014, three of them came from the Toyota family. The Toyota Prius and Prius C were in the top two, while the Camry was in the number four position. The Ford Fusion and Nissan Leaf made up the third and fifth spots, respectively. It’s these insights that enable the automotive industry and its consumers to take the appropriate action and make the best decisions for them. For consumers, gaining insight into the market allows them to paint a clearer picture of what options are most popular and available. For dealers and manufacturers, they are able to gain a better understanding of consumer demand and provide inventory that meets the needs of the market. The fact of the matter is, opportunity exists everywhere you look, you just have to know what you’re looking for. You can’t let preconceived notions or ideas dictate future decisions. By leveraging data and insight, the automotive industry is able uncover the unknowns and put itself in a good position to succeed, while helping consumers purchase vehicles that meet their specific lifestyle.