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Vehicle Financing - US - April 2014

Published By :

Mintel

Published Date : May 2014

Category :

Banking

No. of Pages : 133 Pages

The overall stability in the retail credit markets means vehicle financers have access to cheap credit to lend at competitive rates. As the market for low interest loans has become saturated in the super prime and prime risk tiers, increasingly, financers are looking mostly toward nonprime and the higher end of subprime but some are even diving into the deep subprime risk tier for additional income. Traditionally, retail banks, credit unions, and captive lenders left this marketplace mostly in the hands of subprime lenders and buy here pay here car dealerships.

Table of content

Scope and Themes

What you need to know
Definition
Data sources
Sales data
Consumer survey data
Abbreviations and terms
Abbreviations
Terms

Executive Summary

The market
Automotive lending debt increases by $80 billion in 2013
Figure 1: Auto loans, total outstanding debt, 2003-13
Majority of car buyers finance purchase
Figure 2: Share of new and used vehicles with lender on title, 2012-13
Majority of vehicle financing is for auto loans
Figure 3: Auto financing, loans versus leases, 2012-13
Figure 4: New lease share of new vehicle financing, 2009-13
Market factors
Subprime lending critical to growth in vehicle financing sector
Figure 5: Subprime lending growth, 2009-13
Retail channels
Retail banks biggest player in vehicle financing; still, the market is highly fragmented
Figure 6: Automotive loan (excluding leasing) market share, by type of lender, Q4 2013
Key players
Top 20 lenders control more than 50% of retail vehicle financing and leasing
Figure 7: Top 11 lenders, by total retail automotive loan market share, Q4 2013
The consumer
65% of adults have a prime credit score
Figure 8: VantageScore groups, November 2012-December 2013
Baby Boomers more likely to state value of trade-in as cause for wanting another vehicle
Figure 9: Reasons for purchasing another vehicle, by generations, November 2013
More than half of car purchase intenders expect to finance
Figure 10: Payment method for next vehicle, December 2013
Most car purchase intenders who plan to finance have an idea where their loan will come from
Figure 11: Type of financing/leasing likely to select, December 2013
Millennials interested in help with selling previously financed/leased vehicle at end of term
Figure 12: Most interesting financing perks/benefits, by generations, December 2013
A third of respondents decide to get preapproval before shopping
Figure 13: Most interesting financing perks/benefits, by generations, December 2013
What we think

Issues and Insights

Should retail banks and captives increase their share of the subprime market?
The issues
The implications
How to better cater to a growing Hispanic audience
The issues
The implications

Trend Applications

Trend: Prepare for the Worst
Trend: Many Mes
Mintel futures: Mood to Order

Market Drivers

Key points
Access to credit most important driver for vehicle financing
Figure 14: Prime and subprime risk score categories – share of auto loans, 2009-13
Figure 15: Average credit score of new vs used car buyers, 2008-13
Figure 16: Average new and used vehicle financing loan characteristics,, Q4 2013
Car sales dictate growth or decline in vehicle financing
Figure 17: US unit sales of new and used vehicles vs auto loan originations, 2008-13
Aging US vehicle fleet provides potential increase in car purchasing demand and vehicle financing
Figure 18: Average age of cars, light trucks, and total light vehicles, 2002-13
Used car pricing has lasting impact on leasing
Figure 19: New lease share of new vehicle financing, 2009-13
Willingness to take on new debt dependent on consumer expectations
Figure 20: Mean of consumers’ estimated probability of delinquency on debt payment, 06/2013-03/2014
Figure 21: Consumers’ expectations, change in credit availability, March 2014
Increasing debt loads potential warning sign for vehicle financing
Figure 22: Total outstanding consumer debt vs automotive debt, 2003-13
Fiscal and monetary policies directly impact consumer lending

Retail Channels

Key points
Market background
Figure 23: Automotive loan (excluding leasing) market share, by channel, Q4 2013
Figure 24: Auto financing, by loans vs leases, 2012-13
Retail banks
Figure 25: Retail bank risk distribution of auto loan originations, Q4 2013
Captive lenders
Figure 26: Captive lender risk distribution on auto loan originations, Q4 2013
Credit unions
Figure 27: Credit union risk distribution on auto loan originations, Q4 2013
Nonprime lenders
Figure 28: Nonprime lenders risk distribution on auto loan originations, Q4 2013
Buy here pay here (BHPH) car dealers
Figure 29: BHPH risk distribution on auto loan originations Q4 2013

Leading Companies

Key points
Top 20 lenders control more than 50% of retail vehicle financing and leasing
Figure 30: Top 20 lenders, by share of total retail automotive consumer finance units, loan and lease, Q4 2013
Toyota Financial Services
Ally Financial
Wells Fargo Dealer Services
Honda Finance Services
Ford Motor Credit Company
Chase Auto Finance
Nissan Motor Acceptance Corporation
Capital One Financial Corporation

Innovations and Innovators

Toyota Financial Services creates asset-backed security for some of its hybrid and EV loans and leases
Figure 31: Toyota’s Asset-Backed Green Bond, March 2014
BMW’s “OwnersChoice with Flex” gives plug-in hybrid buyers affordable balloon payment option coupled to tax credit
Figure 32: 2014 BMW i3, March 2014
Foundation pilots lower interest for on-time payments among low-income borrowers

Marketing Strategies

Strategy: Focus on savings through refinancing
Figure 33: Capital One, “Ready, Set, Save,” February 2014
Figure 34: Nationwide Bank, “refinance your car,” January 2014
Figure 35: LendingTree.com , “refinance your automobile,” march 2014
Strategy: Combine sweepstakes with financing offer
Figure 36: Pentagon Federal Credit Union, “You could WIN,” December 2013
Strategy: Promote interest savings through energy-efficient vehicle purchase
Figure 37: US Bank, “Go Green. Save Green,” November 2013
Strategy: Make the bank a one-stop shop for car buying
Figure 38: USAA Bank, “Car Buying Service,” March 2013
Strategy: Emphasize complimentary maintenance, above Blue Book value on trade-ins
Figure 39: Porter Chevrolet, “Chevy open house event,” March 2014
Figure 40: Urse Dodge Chrysler Jeep Ram, “Buy Back Program,” March 2014

Profile of the American Car Buyer

Key points
58% of adults say someone in household likely to buy another car in the next three years
Figure 41: Intent to purchase a vehicle in the next three years, November 2013
Millennials more likely to say they’ll buy a car in the next three years
Figure 42: Intent to purchase a vehicle in the next three years, by generations, November 2013
Nearly half of car purchase intenders plan to buy a car in the next year
Figure 43: Approximately when next vehicle will be purchased, November 2013
Majority of car purchase intenders plan to purchase a new car
Figure 44: Purchase intent, by new, used, or CPO, November 2013
Majority of respondents spent $10,000-29,999 on last vehicle purchase
Figure 45: Cost of most recently acquired vehicle, November 2013
Credit scores improve with age
Figure 46: VantageScore groups, by age, November 2012-December 2013
Wealthier households and better credit
Figure 47: VantageScore groups, by household income, November 2012-December 2013
Average length of loan/lease: around four years
Figure 48: Length of auto financing, by age, November 2012-December 2013
Only a fraction of car purchase intenders purchase another car because financing or leasing has ended
Figure 49: Reasons for purchasing another vehicle, November 2013
Baby Boomers/Swing Generation more likely to state value of trade-in as cause for wanting another vehicle
Figure 50: Reasons for purchasing another vehicle, by generations, November 2013
New car intenders more concerned with the value of their trade-in
Figure 51: Reasons for purchasing another vehicle, by purchase intent – new, used, CPO, November 2013
Nearly a quarter of those not expecting to buy another car say it’s because they don’t have savings or can’t finance
Figure 52: Reasons for not wanting another vehicle within the next three years, December 2013

Payment Method for Next Vehicle

Key points
More than half of car purchase intenders expect to finance
Figure 53: Payment method for next vehicle, December 2013
Those earning <$50K less likely to know how they’ll pay for their next vehicle
Figure 54: Payment method for next vehicle, by household income, December 2013
More than a quarter of Millennials plan to use credit card when purchasing next car
Figure 55: Payment method for next vehicle, by generations, December 2013
Households that own multiple vehicles more likely to finance
Figure 56: Payment method for next vehicle, by number of vehicles in household, December 2013
New car and certified pre-owned purchase intenders more likely to finance
Figure 57: Payment method for next vehicle, by vehicles(s) to be new, used, or certified pre-owned (CPO), December 2013

Type of Financing/Leasing Likely to Select

Key points
Most car purchase intenders who plan to finance have an idea where their loan will come from
Figure 58: Type of financing/leasing likely to select, December 2013
$100K+ households more likely to intend to lease
Figure 59: Type of financing/leasing likely to select, by household income, December 2013
Millennials seem to have just as much of an idea as to which co.’s they’ll finance with when compared to Baby Boomers
Figure 60: Type of financing/leasing likely to select, by generations, December 2013
New car intenders more likely to say financing will come through automaker
Figure 61: Type of financing/leasing likely to select, by vehicles(s) to be new, used, or certified pre-owned (CPO), December 2013
Vehicle financing intenders have disparate desires for financial features
Figure 62: Type of financing/leasing likely to select, by most interesting financing perks/benefits, December 2013
Figure 63: Type of financing/leasing likely to select, by most interesting financing perks/benefits, December 2013 (part 2)

Most Interesting Financing Perks/Benefits

Key points
Low interest and monthly payments of most interest
Figure 64: Most interesting financing perks/benefits, December 2013
Women looking for convenient payment options more than men
Figure 65: Most interesting financing perks/benefits, by gender, December 2013
Those earning <$50K show more interest in financial hardship protections
Figure 66: Most interesting financing perks/benefits, by household income, December 2013
Millennials interested in help with selling previously financed/leased vehicle at end of term
Figure 67: Most interesting financing perks/benefits, by generations, December 2013
New and certified pre-owned car purchase intenders more interested in low or no interest loans
Figure 68: Most interesting financing perks/benefits, by vehicles(s) to be new, used, or certified pre-owned (CPO), December 2013

Considerations About Vehicle Financing During Car Purchasing Process

Key points
A third of respondents decide to get preapproval before shopping
Figure 69: Considerations about vehicle financing during car purchasing process, December 2013
Nearly a third of households earning <$50K worried they won’t qualify for financing
Figure 70: Considerations about vehicle financing during car purchasing process, by household income, December 2013
Millennials more likely to want independent adviser to look over loan before signing
Figure 71: Considerations about vehicle financing during car purchasing process, by generations, December 2013
Certified pre-owned intenders appear to be the more “prepared” vehicle finance intender
Figure 72: Considerations about vehicle financing during car purchasing process, by vehicles(s) to be new, used, or certified pre-owned (CPO), December 2013

Race and Hispanic Origin

Key points
Hispanics, Blacks more likely to say they expect to purchase a car
Figure 73: Intent to purchase a vehicle in the next three years, by race/Hispanic origin, November 2013
Hispanics, Blacks more likely to want to purchase a car in the next year
Figure 74: Approximately when next vehicle will be purchased, by race/Hispanic origin, November 2013
White and Asian respondents have better credit ratings than Hispanics or Blacks
Figure 75: VantageScore groups, by race/Hispanic origin, November 2012-December 2013
Purchase intent, whether new or used, not particularly varied by race
Figure 76: Purchase intent by new, used, or CPO, by race/Hispanic origin, November 2013
Hispanics, Blacks say they need another vehicle for the needs of their family
Figure 77: Reasons for purchasing another vehicle, by race/Hispanic origin, November 2013
More than a quarter of Black car purchase intenders don’t know how they’ll pay for their car
Figure 78: Payment method for next vehicle, by race/Hispanic origin, December 2013
Hispanics more likely to say they’ll finance with buy here pay here dealership
Figure 79: Type of financing/leasing likely to select, by race/Hispanic origin, December 2013
Hispanics more interested in financial hardship features when compared to non-Hispanics
Figure 80: Most interesting financing perks/benefits, by race/Hispanic origin, December 2013
More Hispanics plan to get preapproval for financing when compared to non-Hispanics
Figure 81: Considerations about vehicle financing during car purchasing process, by race/Hispanic origin, December 2013

Appendix – Other Useful Consumer Tables

Payment method for next vehicle
Figure 82: Payment method for next vehicle, by gender, December 2013
Figure 83: Payment method for next vehicle, by gender and age, December 2013
Type of financing/leasing likely to select
Figure 84: Type of financing/leasing likely to select, by gender, December 2013
Figure 85: Type of financing/leasing likely to select, by marital status, December 2013
Figure 86: Type of financing/leasing likely to select, by number of vehicles in household, December 2013
Figure 87: Type of financing/leasing likely to select, by driver groups, December 2013
Most interesting financing perks/benefits
Figure 88: Most interesting financing perks/benefits, by marital status, December 2013
Figure 89: Most interesting financing perks/benefits, by region, December 2013
Figure 90: Most interesting financing perks/benefits, by type of financing/leasing likely to select, December 2013
Figure 91: Most interesting financing perks/benefits, by type of financing/leasing likely to select, December 2013
Figure 92: Most interesting financing perks/benefits, by number of vehicles in household, December 2013
Race and Hispanic origin
Figure 93: Cost of most recently acquired vehicle, by race/Hispanic origin, November 2013
Figure 94: Reasons for not wanting another vehicle within the next three years, by race/Hispanic origin, December 2013

Appendix – Trade Associations

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