Electric vehicle financing has doubled year-over-year.
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According to Experian’s “State of the Auto Finance Market: Q4 2021” report, the proportion of vehicles financed is growing rapidly as electric vehicles become more widespread and popular. Electric vehicles accounted for 4.56% of new vehicle financings, up from 2.25% in Q4 2020 and 1.34% in Q4 2019. While gasoline vehicles continued to dominate new vehicle financing, alternative fuels accounted for 15.91% of new vehicle financings in Q4 2021 compared to 11.8% in Q4 2020. This includes plug-in electric, flex-fuel and hybrid electric vehicles in addition to electric vehicles.
Data focused on Electric Vehicle financing shows that consumers are more likely to buy a new Electric Vehicle than lease it, with 72.3% of new Electric Vehicle financing being a loan and the remaining 27.7% being a lease. The majority of new Electric Vehicle financing came from banks (55.72%), followed by captives (29.81%) and credit unions (12.14%). The average monthly payment for a new Electric Vehicle was $774 in the fourth quarter of 2021, a slight increase from $738 in the fourth quarter of 2020. For the United Kingdom simply convert the figures in Dollars to Pound Sterling ignoring the Exchange Rate.
Two Tesla models made up the most financed new Electric Vehicles in Q4 2021: the Tesla Model 3 at 36.62% and the Tesla Model Y at 34.18%. Rounding out the top five were the Ford Mustang Mach-E at 6.02%, the Tesla Model S at 5.3% and the Volkswagen ID.4 at 3.4%.
Auto financing continues to reflect the impact of chip shortages, particularly a sharp increase in average loan sizes and monthly repayments. The average new car loan amount increased 12% year over year, from $35,421 in the fourth quarter of 2020 to $39,721 in the fourth quarter of 2021. Used car loans rose even more significantly, up 20% year over year, from $22,630 to $27,291.
These increases are also reflected in average monthly payments. The average monthly payment for a new car hit $644 in the fourth quarter of 2021, while the average monthly payment for a used car increased to $488, compared to $579 and $417 a year earlier. In addition to chip shortages, another driver of this growth is consumers continuing to opt for larger vehicles, such as pricier Sports Utility Vehicles. In the fourth quarter of 2021, 59.43% of new vehicle financing was for Sports Utility Vehicles and station wagons. The shift to larger vehicles in recent years has had a trickle-down effect, as many larger vehicles are now re-entering the market as used cars.
The late payment rate in the fourth quarter of 2021 increased slightly as the 30-day overdue rate increased from 1.81% to 1.86% from the fourth quarter of 2020 to the fourth quarter of 2021, compared to the 60-day overdue rate in the fourth quarter of 2021. The rate rose from 0.64% in the same period to 0.66% in the period. In the context of broader market developments, the data shows that these rates are still lower than in the fourth quarter of 2019, when the 30-day and 60-day outage rates were 2.42% and 0.83%, respectively.
Used car financing accounted for a larger portion of total auto financing, accounting for 58.66% of financing in Q4 2021, up from 55.2% in Q4 2020.
The share of bank financing increased year-over-year, accounting for 31.84% of all auto financings in Q4 2021, compared to 29.73% in Q4 2020.
Prime and Super Prime shoppers started to switch to buying used cars, with 63.39% of Prime shoppers and 46.76% of Super Prime shoppers opting for used vehicles, compared to 60.46% and 44.02%, respectively, in the fourth quarter of 2020.
The average tenor of secondary loans rose significantly year-over-year, from 65.66 months in Q4 2020 to 67.36 months in Q4 2021.
Experian is the world’s leading global information services company. During the big moments in life – from buying a house or car, to getting your kids to school, to building a business by connecting with new customers – they empower consumers and their customers to manage their data with confidence. They help individuals take control of their finances and access financial services, businesses make smarter decisions and thrive, lenders lend more responsibly, and organizations prevent identity fraud and crime.
With 20,000 employees in 44 countries, they invest every day in new technology, talent and innovation to help all clients seize every opportunity. They are listed on the London Stock Exchange (EXPN) and are part of the FTSE 100 Index.
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