• by Karl Greenberg , December 2, 2015

November was a big month for cars, and financing and leasing are fueling the showroom action. The automotive division of financial data company Experian, in its “Q3 2015 State of the Automotive Finance Market,” finds that the percentage of new vehicles financed last quarter reached an all-time high of 86.6%, while the average credit score for a new vehicle loan fell to 710, the lowest since Q3 2007. 

Last quarter, the average monthly payment for a new vehicle was $482, up $12 from the previous year, and the average monthly payment for a used vehicle reached $361.

And leasing accounted for nearly 27% of new vehicle transactions in the third quarter, up from 24.7% during the quarter last year. The firm says those lease numbers mark a high-water mark on vehicle leasing since Experian began studying the auto finance market in 2006. The average monthly lease payment is now $398, more or less flat with last year. 

Melinda Zabritski, Experian's senior director of automotive finance, said rising transaction prices for cars, which is great for automakers and dealers since it means consumers are buying more expensive trim levels, has meant higher loan amounts for both new and used vehicles. During the third quarter this year, the average amount financed for a new vehicle was $28,936, up $1,137 from the previous year. The average amount financed for a used vehicle was $18,866, up $290 over the same time period, per the firm, she said. On average, consumers finance $10,070 less on a used vehicle than on a new one.

Loan terms are also heading up. Experian found that, during the third quarter, the percentage of consumers who took out new and used vehicle loans with terms between 61 and 72 months reached all-time highs. About 44% took out 61- to 72-month loans for new cars, and more than 41% financed a used vehicle for the same duration, per the report. 

The same trend is holding for longer-term leases, those that go from 73 to 84 months. The firm saw a 17.1% lift over the previous year, reaching a record of 27.5% of consumers. Used vehicle loans extending in the 73- to 84-month term also reached an all-time high of 16.2%. 

The good news for automakers is that their own finance companies are getting more of the business. Lending companies owned by OEMS financed 51.6% of new vehicle loans last quarter, up from 36.8% back in 2011. Thus, in the third quarter, OEM captive finance companies had the largest market share of new vehicle financing since the recession, per Experian. Banks have 34.7% of new and used vehicle loans. Finance companies, which get most of their business from customers with subprime and deep-subprime credit, gained share year over year, reaching 13.34% in Q3 2015, up 6.4%.

"Captive lending has made a comeback since suffering a steep drop-off caused by declining new sales and lender-type shifts during the recession," said Zabritski. "This is good news for manufacturers, as their captive finance companies often provide an additional source of revenue as well as a strong pipeline to credit for their dealer networks."