(Reuters) – A record number of U.S. consumers are taking out loans to buy cars, especially those purchasing used vehicles, according to data released on Wednesday.
In the second quarter, 85 percent of new car purchases and 53.8 percent of used car purchases were financed, according to data from Experian Plc (EXPN.L), an information provider.
That was up 0.5 percentage points and 0.9 percentage points, respectively from the same period in 2013.
Additionally, the size of auto loan amounts and monthly payments continued to rise, especially for used cars. Since the second quarter of 2013, the average used vehicle loan rose 1.9 percent to $18,258 and the average monthly payment on such vehicles rose 1.1 percent to $355, both all-time highs.
“More and more consumers, especially those that are credit challenged, are turning to the used vehicle market as a viable option to purchase their next car,” said Melinda Zabritski, senior director of automotive finance for Experian, in a statement.
Banks were the largest lenders to consumers buying used cars, financing 35.6 percent of all such purchases, or 0.8 percentage points less than the second quarter of last year.
In recent years banks have begun to focus more on the used car market as automakers’ in-house financing arms came to dominate the new car market. Such “captive” finance companies made more than one out of every two new car loans in the second quarter, according to Experian.
Regulators have become more concerned with banks’ willingness to lengthen terms on car loans, lend to borrowers with lower credit scores and give out loans that are larger than vehicles are worth.
In addition, the U.S. Department of Justice has started investigating subprime auto loans that companies such as General Motors Co’s (GM.N) auto financing arm and Santander Consumer Holdings USA Inc (SC.N) have made and securitized since 2007.
But at least in the second quarter, the share of both new car and used car loans that went to borrowers with subprime credit scores declined, according to Experian.