Average monthly payments and the average amount financed were higher for both new and usedvehicle loans in the fourth quarter of 2022 vs. a year ago.
But the increase was at a slower pace than prior quarters, possibly an indication of better availability – that’s the relatively good news in the just-published Quarterly Credit Industry Insights Report from TransUnion.
“The average amount barely moved,” says Satyan Merchant, senior vice president and head of TransUnion’s auto finance business. “That’s a good sign, coming from the inventory challenges we were facing.”
The bad news is interest rates rose so much in 2022, a total of 4 percentage points in the Federal Funds rate, that the rise in monthly auto-loan payments in Q4 2022 vs. a year ago was out of proportion percentage-wise, considering the narrow rise in the amount financed.
“It’s a function of the interest rate,” Merchant tells Wards.
A high mix of models with high trim and equipment levels, especially light trucks, also contributes to increases in loan size and monthly payments, he says. In the continuing short-supply environment, dealer and manufacturer incentives also are low.
“For Q4, for the entire year of 2022, there are very few incentives, whether subvented loans or cash back from the manufacturer,” Merchant says.