The myth of the subprime bubble in the auto lending industry was dispelled by a leading analyst today at a conference of consumer finance company executives and state regulators.
Melinda Zabritski, Senior Director for Experian Automotive’s financial solutions team, addressed the 20th annual state government affairs and legal forum jointly hosted by the American Financial Services Association (AFSA) and the National Association of Consumer Credit Administrators (NACCA).
“What happens in auto finance affects the whole consumer credit industry,” said. “The subprime bubble is not an issue of a bubble, because it’s a cycle. The real issue is affordability because that changes what people buy and how they buy.”
She said in the mid 1980s, car loan terms started to increase from 46 to 52 months. Today, more than 1 in 4 loans are 73+ months with some reaching 84 months. In Q4 2017, average car loans were at $31,000 with an average loan rate of 5.1%. That would translate into a vehicle loan for 48 months at $717 a month. But by increasing the loan term to 72 months the average monthly payment drops to $502. At 84 months, the monthly payment is $440.
But the most revealing statistic Zabritski cited was that the average per capita income in the United States also is $31,000, the same figure as the average new car loan. In the past 10 years, the average new car loan amount has risen from $24,000 to today’s $31,000.
“The average American can’t afford a new car,” she said. “The 72-month car loan is not new. It made up just over 10 % of the auto loan market in 2008 but has increased to 23.9% of the market today.”
The affordability issue, she said, helped drive the popularity of leasing in the new car market. Today, leasing is 35% of the car sales vs. 22% in 2006. But rather than luxury vehicles, the most-leased vehicles are entry-level Honda Civic, Nissan Rogue, Chevy Equinox, Toyota RAV 4 and Ford Escape.
Affordability of new cars extends loan terms
Jun 07, 2018
The myth of the subprime bubble in the auto lending industry was dispelled by a leading analyst today at a conference of consumer finance company executives and state regulators.
Melinda Zabritski, Senior Director for Experian Automotive’s… Read the rest
“Perfect” Modern Auto Finance
Jun 06, 2018
WoltersKluwer
Learn about the problems of modern auto finance and maintaining perfection. You may be at risk if you do not follow due diligence steps closely. Some lenders never protect their interest by perfecting their lien.
As we talk to… Read the rest
Intermittent Downtime 2-3 p.m. ET Today
Jun 06, 2018
AFSA will be making small changes to the website and association database from 2:00 – 3:00 p.m. ET today. As such, you may experience intermittent disruptions accessing AFSA resources.
We apologize for the inconvenience. If you have… Read the rest
AFSA Asks the Bureau to Improve Field Hearings
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In response to a request for information from the Bureau of Consumer Financial Protection on its external engagements, AFSA wrote that the Bureau should improve field hearings so that they provide more meaningful feedback, instead of functioning… Read the rest
Register your employees for the AFSA Leadership Development Program
May 31, 2018
Registration for the AFSA Leadership Development Program closes June 15. Don’t miss this important opportunity for your employees to participate in a 6-day intensive program focused on the development of your organization's… Read the rest
Don’t Miss Key Sessions at the NACCA/AFSA Forum!
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Business confidence high across global economies; outlook cautious
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The American Financial Services Association (AFSA) held its 28th annual Credit Summit for Fixed Income Investors today in Midtown Manhattan, in close proximity to the offices of many of the 170 attendees.
Ebrahim Rahbari, Managing Director… Read the rest
Cash is Still King…Right? | AFSA Webinar May 22
May 17, 2018
Join us on Tuesday, May 22, 2018 at 2:00 p.m. ET for Industry Trends in Cash Payments & Hispanic Market Insights, presented by PayNearMe. Registration for AFSA members is open now.
This webinar looks at new analyses which yield interesting… Read the rest
Futurist sees digital platforms gaining ground in consumer credit
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Well-regarded futurist and author Shawn DuBravac, PhD, addressed the consumer credit industry’s outlook with respect to digital technology’s impact on business models, customers and employees last month at AFSA’s… Read the rest
AFSA Applauds House Passage of S.J. Res 57
May 08, 2018
WASHINGTON, May 8, 2018 – Today, the House of Representatives approved S.J. Res. 57 by a 234-175 vote. The vote on the resolution, under the Congressional Review Act (CRA), disapproves of the Consumer Financial Protection Bureau’s… Read the rest