US records highest number of auto loans in second quarter 2014

85% of new cars and 53.8% of used car purchases are financed in the second quarter as per Experian Plc (EXPN.L). The size of loan amount and the respective monthly payments have also continued to rise since the second quarter of 2013.

According to this survey results released on Wednesday, the number of used car purchases financed this year is the highest ever. The average used vehicle loan rose 1.9% and average monthly installment for used vehicles rose by 1.1% since second quarter of 2013.

The auto industry shows a great shift of US consumers towards buying used vehicles. No doubt that most consumers turning to used vehicles are credit challenged, but the most important factor is that buying used vehicle is a viable option for anyone.

The biggest lenders of used car finance were the banks, with 35.6% of total purchases financed. Banks have been focusing more on used car finances since more than 50% of new car purchase finance is covered by the auto manufacturer’s in-house financing units. As per Experian report, such finance companies have been dominating the new car market in the second quarter.

Auto finance regulators are concerned with the leverage offered by banks when lending to subprime market. They are willing to lengthen the tenure of loans, lending more amount than the worth of vehicle and accepting applications of individuals with low credit score. It is acceptable till they keep their risk at manageable levels. US Department of Justice have started investigating subprime auto lending companies like General Motors Co’s (GM.N) and Santander Consumer Holdings USA Inc (SC.N).

The largest US auto lender remains Wells Fargo & Co (WFC.N), leading with the market share of 5.75%. Ally Financial Inc (ALLY.N) becomes the second largest US lender with One Financial Corp (COF.N) taking the third position. JPMorgan Chase & Co (JPM.N) at fourth place, and falling behind McLean, Virginia based bank with increased market share of 4.20% from 3.77% last year.

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