ATLANTA—Expect more used car financing in 2018, as well as a decline in leasing, according to a new report.
Analyzing Q4 data, Equifax outlined several trends to watch within the automotive industry this year.
Sales of new autos fell 1.9% in 2017, however sales of used vehicles climbed 1.5% during the year.
“Much of this was the result of a continuation of off-lease activity, which is attractive to buyers looking for still-new vehicles at a good value,” said Gunnar Blix, Equifax deputy chief economist. “This trend of shrinking new sales and increasing used sales is expected to continue throughout 2018.”
Because of the falling volume of new auto sales, lease activity is also expected to dip slightly.
“A larger share of used transactions is financed, therefore leasing will pull back slightly,” Blix explained.
Between 2010 and 2014, the share of accounts for captives written as leases increased steadily from 28% of accounts in 2010 to nearly 40% in 2017, noted Blix.
“As vehicle prices have risen, more captives are packaging together deals with incentives, helping them grow their share of lease portfolios,” he said.
Blix noted that 70.8% of auto leases were in the three-year range (between 26 and 37 months) in 2017.
“Two-year leases have become somewhat less common (6.3% of accounts in 2017), but similarly leases longer than three years have become less frequent (22.9% of accounts in 2017),” he said.
As CUToday.info has extensively reported, banks have pulled back their market share of auto loan originations, noted Blix. He said that banks have withdrawn from 39.2% share in the fourth quarter of 2016 to 33.9% share in the fourth quarter of 2017.
“Credit unions had a 27.9% share of originations in the last quarter of 2017, while captives represented a 32.6% share,” he said.
Independents, monolines and dealer financing made up the remaining 5.6% share, down just 0.1 percentage points (10 bps) from the previous year.
"As higher vehicle prices have made their way into the showroom over the last few years, captives in particular have leveraged increased incentives as a way to grab a larger share of auto loan originations for customers," said Blix. "While this has been the case for new vehicle sales, it remains to be seen how this landscape is shaped throughout 2018 for the increase in used sales, including sales to subprime customers."