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Vehicle Financing - US - May 2017

Published By :

Mintel

Published Date : May 2017

Category :

Insurance

No. of Pages : N/A

New car sales are slowing, driving competition in lending. While interest rates remain the most important consideration for borrowers, lenders – regardless of whether they are financial institutions, dealers, or third parties – have to find ways to differentiate themselves outside of rates. Customer service and convenience are also important, and lenders, dealers, and manufacturers are working to streamline the shopping, buying, and financing processes and make it possible for customers to do everything online if they want to.

Table of Content

OVERVIEW
What you need to know
Definition

EXECUTIVE SUMMARY
The issues
Millennials are more likely to use the most expensive forms of financing
Figure 1: Source of financing, by generation, March 2017
Fewer are looking to loans for future purchases
Figure 2: Payment option, by timing of vehicle purchase, March 2017
The opportunities
Build relationships with existing customers to increase satisfaction
Figure 3: Attitudes toward loans and lenders, by generation, March 2017
Figure 4: Ally Auto email, 2016
Interest rates are rising
Figure 5: Most important loan/lender benefits, March 2017
One-stop shopping for car and loan
Figure 6: Attitudes toward loans and lending, by generation, March 2017
What it means

THE MARKET – WHAT YOU NEED TO KNOW
Number of auto loans explodes
Auto debt climbs higher
Auto loan delinquency rates are rising
Originations remain strong
New car sales are down
Interest rates
Gas prices

MARKET SIZE
Number of auto loans explodes
Figure 7: Number of auto loans, Q4 2011-Q4 2016
Auto debt climbs higher
Figure 8: Total and auto debt, Q4 2011-Q4 2016
Higher delinquency rates are a potential warning
Figure 9: Percentage of loan balances 90+ days delinquent, Q4 2011-Q4 2016
30+ day delinquency balances are higher
Figure 10: New delinquent auto loan balances, Q4 2011-Q 4 2016
Originations remain strong
Figure 11: Auto loan originations by credit score, Q4 2011- Q4 2016

MARKET FACTORS
New car sales are down
Figure 12: Total US unit sales of new and used cars and light trucks, 2011-16
Interest rates
Gas prices
Figure 13: US gasoline and diesel retail prices, January 2007-January 2017
Longer-term loans are more popular
Figure 14: Preference for long-term loan, by gender and age, March 2017

MARKET BREAKDOWN
Trends in sources of financing for new and used vehicles
Figure 15: Market share of new financing, Q4 2015-Q4 2016
Figure 16: Market share of used financing, Q4 2015- Q4 2016

KEY PLAYERS – WHAT YOU NEED TO KNOW
One-stop shopping and lending online
More ride sharing may lead to increased car sales
Delinquencies may increase with higher interest rates
Lack of trust in dealers is hurting lending efforts
Ford is first manufacturer to combine online sales and lending
Use of alternative data in determining creditworthiness

WHAT’S WORKING?
One-stop shopping and lending online
Carvana and Vroom.com
Walmart
Capital One
Figure 17: Capital One Auto Navigator statement stuffer, 2017
Growth in car sharing could boost car sales

WHAT’S STRUGGLING?
Delinquencies may increase with higher interest rates
Lack of trust in dealerships may be hurting their lending efforts

WHAT’S NEXT?
Ford partners with AutoFi to eliminate trips to the dealer
Use of alternative data in determining creditworthiness
Clearlane from Ally Bank

THE CONSUMER – WHAT YOU NEED TO KNOW
Most are planning to buy a car relatively soon
Near-term buyers more likely to be Hispanic
New, not used, are most popular for next car purchase
Loans are most popular payment option – but demand is decreasing
Most buyers know how they will finance
Interest rate is most important
Lower-income households seek protection against financial hardship
More would pay more upfront to get a lower rate
Banks have advantage over dealerships
Millennials most likely to prefer online loan shopping
Young borrowers need guidance

PROFILE OF CAR BUYERS
Most are planning to buy a car within the next three years
Figure 18: Car buying plans, by time to purchase, March 2017
Men are more likely to buy
Figure 19: Car buying plans, by gender, March 2017
Figure 20: Chevrolet mobile ad, 2017
Near-term buyers more likely to be Hispanic
Figure 21: Car purchase plans, by Hispanic origin, March 2017
Figure 22: Toyota print ad, 2017
Parents will be in the vehicle market shortly
Figure 23: Car purchase plans, by parental status, March 2017
Most buyers plan to trade in a car
Figure 24: Trade-in plans, March 2017
New, not used, are most popular for next car purchase
Figure 25: Type of vehicle to be purchased next, March 2017

MOST LIKELY PAYMENT METHOD
Loans are most popular payment option
Figure 26: Most likely payment method, last vehicle purchased and next vehicle purchased, March 2017
More Hispanics are planning to borrow
Figure 27: Most likely payment method, last vehicle purchased and next vehicle purchased, by Hispanic origin, March 2017
Half of Gen X plans to get a vehicle loan
Figure 28: Most likely payment method for next vehicle purchased, by generation, March 2017
CPO buyers are most likely to take a loan
Figure 29: Most likely payment method for next vehicle purchased, by type of vehicle, March 2017

SOURCE OF FINANCING
Most buyers know how they will finance
Figure 30: Source of financing, March 2017
Millennials are more likely to use the most expensive forms of financing
Figure 31: Source of financing, by generation, March 2017

MOST IMPORTANT LOAN/LENDER BENEFITS
Interest rate is most important
Figure 32: Important loan/lender benefits, March 2017
Hispanics want low monthly payments
Figure 33: Important loan/lender benefits, by Hispanic origin, March 2017
Lower-income households seek protection against financial hardship
Figure 34: Important loan/lender benefits, by household income, March 2017

LOAN BEHAVIOR
More would pay more upfront to get a lower rate
Figure 35: Loan behavior, by generation, March 2017
Blacks are more concerned about financing upfront
Figure 36: Loan behavior, by race, March 2017
Vehicle buying services appeal to women
Figure 37: Preference for vehicle buying service, by gender and age, March 2017
Figure 38: USAA car loan email
Banks have advantage over dealerships
Figure 39: Loan behavior, by need to finance, March 2017

ATTITUDES TOWARD LOANS AND LENDING
Millennials most likely to prefer online loan shopping
Figure 40: Preference for online loan shopping, by generation, March 2017
Figure 41: Pacific Marine Credit Union auto loan direct mail postcard, 2017
Young borrowers need guidance
Figure 42: Attitudes toward loans and lending, by gender and age, March 2017

CHAID ANALYSIS – THE FINANCING PROCESS
Young women find financing process confusing
Figure 43: Attitudes toward loans and lending – CHAID – Tree output, March 2017
Figure 44: Attitudes toward loans and lending – CHAID – Table output, March 2017

TURF ANALYSIS
Methodology
Interest rates are the most important feature
Figure 45: TURF analysis – Lender benefits, March 2017

APPENDIX – CHAID ANALYSIS METHODOLOGY
Methodology
Figure 46: Attitudes toward loans and lending – CHAID – Table output, March 2017

APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Sales data
Fan chart forecast
Consumer survey data
Direct marketing creative
Abbreviations

APPENDIX – CONSUMER
Have auto loan
Figure 47: Have auto loan, by gender, Oct. 26, 2015-Nov. 30, 2016
Figure 48: Have auto loan, by generation, Oct. 26, 2015-Nov. 30, 2016
Figure 49: Have auto loan, by household income, Oct. 26, 2015-Nov. 30, 2016
Figure 50: Have auto loan, by Hispanic origin/race, Oct. 26, 2015-Nov. 30, 2016
Auto purchase methods
Figure 51: How purchased most recently acquired auto, by gender, Oct. 26, 2015-Nov. 30, 2016
Figure 52: How purchased most recently acquired auto, by generation, Oct. 26, 2015-Nov. 30, 2016
Figure 53: How purchased most recently acquired auto, by household income, Oct. 26, 2015-Nov. 30, 2016
Figure 54: How purchased most recently acquired auto, by Hispanic origin/race, Oct. 26, 2015-Nov. 30, 2016
Length of loan
Figure 55: Length of loan for households’ most recently purchased or leased car, pickup truck, sport utility vehicle or van, February 2014-November 2016

APPENDIX – MARKET
Figure 56: Fan chart forecast for total new light car, new light truck, and used car sales, 2011-21

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