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Vehicle Financing - US - July 2013

Published By :

Mintel

Published Date : Jul 2013

Category :

Banking

No. of Pages : 145 Pages


As Americans suffer from upside down mortgage payments and from stagnating wages, there continues to be a large portion of “payment buyers” in the automotive lending sector; these are buyers who care more about their monthly payments than the net expense of the financing. These borrowers will benefit more from longer loan terms and longer lease installments.
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
Auto debt stands near $800 billion – growing, but still below peak.
Figure 1: Auto loans, total outstanding debt, 2003-13
Market factors
As credit loosens, subprime lending is on the mend
Figure 2: Subprime lending growth, 2008-13
Demand for leasing increases as residuals strengthen
Figure 3: New lease share of new vehicle financing, 2009-13
Increasing educational debt could impact Millennials and their ability to obtain vehicle financing
Figure 4: Student loans, total outstanding debt, 2003-13
Retail channels
Retail banks lead new and used financing; captive lenders dominate leasing
Figure 5: Automotive loan (excluding leasing) market share, Q1 2013
Key players
Top 20 lenders comprise more than 50% of the vehicle financing market
Figure 6: Top 10 lenders, by total retail automotive loan market share, Q1 2013
The consumer
71% of adults have a prime credit score
Figure 7: VantageScore groups, October 2011-November 2012
More than 1 in 10 pay 0% APR interest on their vehicle loan
Figure 8: Interest rates (APR) paid on auto loans, March 2013
Most car owners pay with a combination of cash and financing
Figure 9: Household vehicle ownership, by payment method, March 2013
Consumers figure out what car … then figure out how to afford it
Figure 10: Attitudes toward buying and financing vehicles, March 2013
Most potential borrowers interested in 0% APR incentives
Figure 11: Loan and leasing incentives and features of most interest, March 2013
What we think

Issues and Insights
Millennials have less-established credit histories, need help in putting the right foot forward
The issues
The implications
Consumers care more about getting the car they want and how they can afford the monthly payment over any other consideration
The issues
The implications

Trend Applications
Trend: New Poor
Figure 12: Loan and leasing incentives and features of most interest, by household income, March 2013
Trend: Why Buy
Figure 13: New lease share of new vehicle financing, 2009-13
Mintel Futures: Who Needs Humans?

Market Drivers
Key points
Access to credit vitally important to vehicle financing
Figure 14: Prime and subprime share of auto loans, 2008-13
Figure 15: Average credit score of new vs. used car buyers, 2008-13
Figure 16: Average new and used vehicle financing term, 2013
Car sales positively impact vehicle financing market
Figure 17: U.S. unit sales of new vs. used vehicles, 2007-12
Aging U.S. car parc provides opportunity for financing
Figure 18: Average age of cars, light trucks, and total light vehicles, 1995-2011
Used vehicle sale price help drive leasing market
Figure 19: New lease share of new vehicle financing, 2009-13
Increases in disposable income positively impact vehicle financing
Figure 20: Disposable personal income, Jan. 1, 2000-Dec. 1, 2012
Willingness to take on new debt dependent on consumer confidence
Figure 21: University of Michigan Consumer Sentiment, 2007-13
Declining existing consumer debt loads to positively impact auto lending
Figure 22: Total outstanding consumer debt vs. automotive debt, 2003-13
Governmental fiscal and monetary policies directly impact consumer lending

Retail Channels
Key points
Market background
Figure 23: Automotive loan (excluding leasing) market share, by channel, Q1 2013
Figure 24: Auto financing, by loans vs. leases, 2012-13
Retail banks
Figure 25: Retail bank risk distribution on auto loan originations, Q1 2013
Captive lenders
Figure 26: Captive lender risk distribution on auto loan originations, Q1 2013
Credit unions
Figure 27: Credit union risk distribution on auto loan originations, Q1 2013
Nonprime lenders
Figure 28: Nonprime lenders risk distribution on auto loan originations, Q1 2013
Buy here pay here (BHPH) car dealers
Figure 29: BHPH risk distribution on auto loan originations Q1 2013

Leading Companies
Key points
Top 50% of the vehicle financing market shared by 20 lenders
Figure 30: Top 20 lenders, by total retail automotive loan market share, Q1 2013
Ally Bank
Toyota Financial Services
Wells Fargo Dealers Services
Chase Auto Finance
Ford Motor Credit Company
Honda Finance Services
Nissan Motor Acceptance Corporation

Innovations and Innovators
Tesla Motors creates repurchasing program for its electric sports car
Figure 31: Tesla Motors “true cost of ownership,” June 2013
AutoUSA allows prospects to search inventory by monthly payment
Figure 32: AutoUSA Payment Pro, May, 2013
Mercedes-Benz Financial Services now allows customers to make payments using in-vehicle multimedia systems
Figure 33: MBFS app for mbrace2, May, 2013

Marketing Strategies
Strategy: Focus on “savings” by buying a new vehicle
Figure 34: Rogers Auto Group, “upgrade” email June 2013
Strategy: Promoting exclusivity through “private cash”
Figure 35: Ford Acquisition Mailing, “four vehicles with fuel economy that can’t be beat” March 2013
Strategy: Incentives that cater to a target demographic
Figure 36: Toyota Acquisition Mailing, “Milwaukee tools with a new Tundra,” July 2012
Strategy: Combine a sweepstakes with financing offer
Figure 37: Harms Auto Dealership Acquisition Mailing, “crack the vault and win,” March 2013
Strategy: Emphasize complimentary maintenance, above Blue Book value on trade-ins
Figure 38: Lee Toyota Cross Selling Mailing, “exclusive buy back offer,” Dec. 2012
Strategy: Free gas payments accompany new vehicle purchase
Figure 39: Jenkins cross selling mailing, “$250 complimentary gas,” May 2013

Profile of the American Car Buyer
Key points
Spend and financing
71% of adults have a prime credit score
Credit improves with age
Figure 40: VantageScore groups, by age, October 2011-November 2012
Those with better credit buy more expensive vehicles
Figure 41: Amount spent on latest vehicle purchase, by VantageScore groups, October 2011-November 2012
Midwest residents spend least on vehicle purchase
Figure 42: Amount spent on latest vehicle purchase, by region, October 2011-November 2012
Average vehicle loan: 50 months to term
Figure 43: Length of auto financing, by most recently acquired new/used vehicle, October 2011-November 2012
Interest rates (APR) paid by borrowers
More than 1 in 10 pay 0% APR interest on their vehicle loan
Figure 44: Interest rates (APR) paid on auto loans, March 2013
Higher earners pay less interest on their auto loans
Figure 45: Interest rates (APR) paid on auto loans, by household income, March 2013
Millennials pay more in interest on auto loans, but some still take advantage of low-interest deals
Figure 46: Interest rates (APR) paid on auto loans, by generations, March 2013
New car owners pay less interest on auto loan
Figure 47: Interest rates (APR) paid on auto loans, by vehicle ownership, by purchased new, used, CPO, March 2013
Numbers and types of cars owned
62% of households own more than one car
Figure 48: Number of cars owned per household, by household income, March 2013
80% of married households own two cars
Figure 49: Number of cars owned per household, by marital/relationship status, March 2013
No large differences in number of vehicles owned by generation
Figure 50: Number of cars owned per household, by generations, March 2013
New, used, or CPO?
More than half of respondents own at least one new car; use new car as primary vehicle
Figure 51: Vehicle ownership, purchased new, used, or CPO, by primary, secondary, or tertiary vehicle, March 2013
Over half of households have a car they bought new
Figure 52: Vehicle ownership, by purchased new, used, CPO; for combined primary and nonprimary vehicles in households, by household income, March 2013
Households in the Northeast more likely to own new cars
Figure 53: Vehicle ownership, by purchased new, used, CPO; for combined primary and nonprimary vehicles in households, by region, March 2013
Millennials the most likely to own certified preowned vehicles
Figure 54: Vehicle ownership, by purchased new, used, CPO; for combined primary and nonprimary vehicles in households, by generations, March 2013

Household Method of Paying for Vehicle
Key points
Most car owners utilize combination of cash and financing when purchasing
Figure 55: Method of paying for vehicle, March 2013
Two-thirds of owners financed vehicle; wealthier households more likely to finance
Figure 56: Method of paying for vehicle; combined primary and nonprimary vehicles, by household income, March 2013
Millennials slightly more likely to utilize nonprime lenders and BHPH financing
Figure 57: Method of paying for vehicle; combined primary and nonprimary vehicles, by generations, March 2013

Household Vehicle Ownership, by Auto Loan Product
Key points
Most borrowers opt for simple-interest auto loans
Figure 58: Loan type; by primary and nonprimary vehicles, March 2013
Type of financing product used stable across most income groups
Figure 59: Loan type; combined primary and nonprimary vehicles, by household income, March 2013
Millennials more likely to use BHPH financing
Figure 60: Loan type; combined primary and nonprimary vehicles, by generations, March 2013

Loan and Leasing Incentives and Features of Most Interest
Key points
Most potential borrowers interested in 0% APR incentives
Figure 61: Loan and leasing incentives and features of most interest, March 2013
Appeal to the less wealthy with flexibility in loan payments
Figure 62: Loan and leasing incentives and features of most interest, by household income, March 2013
Reach out to Millennials with deferment and repurchasing incentives
Figure 63: Loan and leasing incentives and features of most interest, by generations, March 2013
Certified preowned car owners more interested in financial incentives than new car or used car owners
Figure 64: Loan and leasing incentives and features of most interest, by vehicle ownership, by purchased new, used, CPO, March 2013
Those seeking “forgiveness” perks in auto loan are likely to be paying higher interest rates on their existing loans
Figure 65: Interest rates (APR) paid on auto loans, by loan and leasing incentives and features of most interest, March 2013
Figure 66: Interest rates (APR) paid on auto loans, by loan and leasing incentives and features of most interest, March 2013 (continued)

Attitudes toward Buying and Financing Vehicles
Key points
Many households figure out the car they want… then figure out how they can afford it
Figure 67: Attitudes toward buying and financing vehicles, March 2013
Households earning $50K-74.9K comparatively more interested in 72+ month loans
Figure 68: Attitudes toward buying and financing vehicles, by household income, March 2013
Millennials more likely to consider auto loan/lease an exercise in credit building
Figure 69: Attitudes toward buying and financing vehicles, by generations, March 2013
Certified preowned vehicles more interested in long-term loans and in credit building
Figure 70: Attitudes toward buying and financing vehicles, by vehicle ownership, by purchased new, used, CPO, March 2013

Race and Hispanic Origin
Key points
Non-Hispanic whites own more vehicles than other race and ethnic groups
Figure 71: Number of cars owned per household, by race/Hispanic origin, March 2013
White, Asian, and Hispanic households more likely to own a new vehicle
Figure 72: Vehicle ownership, by purchased new, used, CPO; for combined primary and nonprimary vehicles in households, by race/Hispanic origin, March 2013
White and Asian respondents have better credit ratings than Hispanics or blacks
Figure 73: VantageScore groups, by race/Hispanic origin, October 2011-November 2012
1 in 10 Hispanic and black respondents pay 0% APR interest
Figure 74: Interest rates (APR) paid on auto loans, by race/Hispanic origin, March 2013
Hispanic households more likely to utilize captive lenders than non-Hispanic households
Figure 75: Method of paying for vehicle; combined primary and nonprimary vehicles, by race/Hispanic origin, March 2013
Blacks and Hispanics more interested in “forgiveness” loan perks
Figure 76: Loan and leasing incentives and features of most interest, by race/Hispanic origin, March 2013
Black and Hispanic households diverge on purchasing behavior
Figure 77: Attitudes toward buying and financing vehicles, by race/Hispanic origin, March 2013

Appendix – Consumer Tables
Profile of the American car buyer
Length of auto financing
Figure 78: Length of auto financing, by region, October 2011-November 2012
Figure 79: Length of auto financing, by age, October 2011-November 2012
Figure 80: Length of auto financing, by VantageScore groups, October 2011-November 2012
Figure 81: Age of vehicle, by method of payment, April 2012-November 2012
Figure 82: Age of vehicle, by method of payment, April 2012-November 2012 (continued)
Method of paying for vehicle
Figure 83: Method of paying for vehicle, by model year, April 2012-November 2012
Figure 84: Institution where loan was issued by general financial attitudinal statements, April 2012-November 2012
Total amount spent on the purchase or lease of the vehicle
Figure 85: Amount spent on latest vehicle purchase, by age, October 2011-November 2012
VantageScores
Figure 86: VantageScore groups, by household income, October 2011-November 2012
Figure 87: VantageScore groups, by region, October 2011-November 2012
Interest rates (APR) paid on auto loans
Figure 88: Interest rates (APR) paid on auto loans, by gender, March 2013
Figure 89: Interest rates (APR) paid on auto loans, by presence of children in household, March 2013
Numbers and types of cars owned
Figure 90: Number of cars owned per household, by presence of children in household, March 2013
New, used, or CPO?
Figure 91: Vehicle ownership, by purchased new, used, CPO; for combined primary and nonprimary vehicles in households, by marital/relationship status, March 2013
Figure 92: Vehicle ownership, by purchased new, used, CPO; for combined primary and nonprimary vehicles in households, by household size, March 2013
Figure 93: Vehicle ownership, by purchased new, used, CPO; for combined primary and nonprimary vehicles in households, by presence of children in household, March 2013
Figure 94: Vehicle ownership, by purchased new, used, CPO; for primary vehicle, by gender and age, March 2013
Figure 95: Vehicle ownership, by purchased new, used, CPO; for primary vehicle, by household income, March 2013
Figure 96: Vehicle ownership, by purchased new, used, CPO; for primary vehicle, by generations, March 2013
Method of paying for vehicle
Figure 97: Method of paying for vehicle; combined primary and nonprimary vehicles, by presence of children in household, March 2013
Figure 98: Method of paying for vehicle; combined primary and nonprimary vehicles, by region, March 2013
Figure 99: Method of paying for vehicle; combined primary and nonprimary vehicles, by age, March 2013
Figure 100: Method of paying for vehicle; primary vehicle, by gender and age, March 2013
Figure 101: Method of paying for vehicle; primary vehicle, by household income, March 2013
Figure 102: Method of paying for vehicle; primary vehicle, by generations, March 2013
Figure 103: Method of paying for vehicle, by household vehicle ownership, by loan type, March 2013
Figure 104: Method of paying for vehicle, by household vehicle ownership, by loan type, March 2013 (continued)
Auto loan product used
Figure 105: Loan type; combined primary and nonprimary vehicles, by gender, March 2013
Figure 106: Loan type; combined primary and nonprimary vehicles, by marital/relationship status, March 2013
Figure 107: Loan type; combined primary and nonprimary vehicles, by vehicle ownership, by purchased new, used, CPO, March 2013
Loan and leasing incentives and features of most interest
Figure 108: Loan and leasing incentives and features of most interest, by attitudes toward buying and financing vehicles, March 2013
Figure 109: Loan and leasing incentives and features of most interest, by attitudes toward buying and financing vehicles, March 2013
Attitudes toward buying and financing vehicles
Figure 110: Attitudes toward buying and financing vehicles, by gender, March 2013
Race and Hispanic Origin
Figure 111: Length of auto financing, by race/Hispanic origin, October 2011-November 2012
Figure 112: Amount spent on latest vehicle purchase, by race/Hispanic origin, October 2011-November 2012
Figure 113: Method of paying for vehicle; primary vehicle, by race/Hispanic origin, March 2013

Appendix – Trade Associations

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