More Consumers Choosing Electric Vehicles, as a Wider Array of Models Enter the Market

Experian’s new report shows electric vehicles made up more than 8% of new vehicle retail transactions in Q4 2023

SCHAUMBURG, Ill.--(BUSINESS WIRE)--With a wider range of models being introduced year after year, electric vehicles (EVs) have gained more traction from consumers in the market for a new vehicle. According to Experian’s State of the Automotive Finance Market Report: Q4 2023, EVs comprised 8.6% of total new retail transactions, up from 7.1% in Q4 2022. Digging a bit deeper, data shows 44.8% of new EV retail transactions were loans, while 30.7% were leases.

“While EV prices are still relatively high, new incentive and rebate programs, combined with more affordable options hitting the market, have resulted in a broader range of consumers choosing EVs,” said Melinda Zabritski, Experian’s head of automotive financial insights. “As newer models roll out and the infrastructure continues to develop, it’ll be interesting to see how the EV market changes in the near and long term.”

Among the top five most purchased EV models in Q4 2023 were the Tesla Model Y (31.9%), Tesla Model 3 (17.6%), Volkswagen ID.4 (3.9%), Ford Mustang Mach-E (3.4%), and Rivian R1S (3.4%).

Incentives drive captives’ market share of new vehicle financing upwards

In Q4 2023, captives encompassed 61.2% of the new vehicle finance market, up from 49.7% a year ago. Banks (20.4%) and credit unions (12.1%) on the other hand both experienced a dip in market share, down 14.6% and 42.2%, respectively.

On the used side, credit unions continued to lead at 29.6% in Q4 2023, however, they were down from 31.7% in Q4 2022. Banks were not far behind at 26.7% this quarter, down from 27.1% last year, while captives increased to 9.6%, from 8.2% over the same period.

Loan terms continue to decrease while rates remain high

The average interest rate for a new vehicle reached 7.2% in Q4 2023, up from 6.1% a year ago, while the average interest rate for a used vehicle was 11.9%, up from 10.4% over the same period. As a result, the data shows that average loan terms decreased for new and used vehicles. In Q4 2023, the average loan term for a new vehicle dropped from 69.3 months to 67.9 months, and the average loan term for a used vehicle declined slightly from 67.9 months to 67.4 months.

However, with higher interest rates and lower terms, the data shows that the average monthly payment increased during the fourth quarter of 2023. The average monthly payment for a new vehicle was $738, up from $720 a year ago, and the average monthly payment for a used vehicle was $532, up slightly from $530 over the same period.

“With interest rates remaining at elevated levels, it’s natural to see consumers continue to opt for shorter-term loans,” Zabritski continued. “While consumers may spend more on their monthly payment, the overall cost of a vehicle is much lower. As the market continues to change, lenders and dealers need to watch the trends carefully to properly assist in-market shoppers.”

Additional findings for Q4 2023:

• The average loan amount for a new vehicle decreased $1,143 to $40,366 in Q4 2023, while the average loan amount for a used vehicle dropped $1,222 to reach $26,685 over the same period.
• The average credit score for new EV buyers decreased from 760 in Q4 2022 to 754 in Q4 2023, while the average credit score for new gas-fueled vehicle buyers increased from 736 to 739 over the same period.
• 30-day delinquencies reached 2.5% in Q4 2023, and 60-day delinquencies reached 0.96%.
• Prime borrowers made up more than 68% of total financing in Q4 2023, with prime at 45.2% and super prime at 23.3%.

To learn more, watch the entire State of the Automotive Finance Market Report: Q4 2023 presentation on demand.

About Experian

Experian is the world’s leading global information services company. During life’s big moments – from buying a home or a car, to sending a child to college, to growing a business by connecting with new customers – we empower consumers and our clients to manage their data with confidence. We help individuals to take financial control and access financial services, businesses to make smarter decisions and thrive, lenders to lend more responsibly, and organizations to prevent identity fraud and crime.

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