Credit reporting company Experian says drivers are opting for used cars over new ones more than ever before. In the second quarter of 2022, 62 percent of car buyers financed a used car, which is a steady increase from 60 percent earlier this year and an even bigger increase from the same quarter last year at 58 percent, according to Automotive News.
While U.S. car buyers have historically opted for used cars, loan trends show preowned sales are outpacing new sales by wider margins. In previous years, total U.S. car loans were split at around 59/41, with the bigger number going to used cars. Based off the latest Experian report, the split is now 62/38 as buyers try to avoid today’s higher prices for new cars.
That doesn’t mean used car buyers are immune to higher auto prices, overall. Since used cars are becoming more expensive, used car loans reached record prices up to $28,534, almost $4,500 more than last year. Monthly payments for used car loans are now up to $515, while loan terms increased to record lengths of 68 months.
And the typical used car shopper is different now than in the past. It’s not just savvy shoppers looking for used cars that’ve already taken the biggest hit from depreciation. Nor is it only shoppers with lower credit scores. Experian says that 77 percent of near-prime customers were financing used cars. These are buyers with credit scores ranging from 601 to 660. But buyers across all credit tiers are picking used cars over new ones.
At the very least, Experian’s data shows that credit unions are becoming more popular among borrowers. Credit unions now hold almost a third of all used car loans, or about 29 percent, which is an increase of five percentage points over last year. Credit unions tend to have lower interest rates than banks and other lenders, so that means used car buyers aren’t taking a bath on their $29,000, $500-a-month, used car loans.
Even though used cars are cheaper, buying any car still seems bleak. Experian’s auto loan figures show many buyers are now having to choose between used cars that cost a lot or new cars that cost even more. It’s no wonder more and more people are flocking to used car lots and skipping dealer showrooms.