$1,768 a month, $10,407 down, 5% APR, on a Ford Pickup? Q3 New Vehicle Financing Update

Automakers need to do some serious navel-gazing on price levels and level up, if they want to sell more vehicles.

By Wolf Richter for WOLF STREET.

To illustrate the data we’ll review in a moment, I “built” a 2023 model year F-250 Lariat on Ford’s website: MSRP $104,070. I could build something more expensive in the F-350 range. Ford suggested financing it with Ford Credit. With a down payment of $10,407 and a five year term, at 5% APR, I’d end up with a monthly payment of $1,768. Screenshot from Ford’s website:

There’s a huge range of options and trim packages, particularly among trucks. I also “built” a 2023 F-150 Lariat, which ended up with an MSRP of $90,780. Ford suggested leasing it from Ford Credit $9,014 down, over 48 months, for $1,007 a month. Screenshot from Ford’s website:

According to Experian’s State of the Auto Finance Market report for loans originated in the third quarter of 2022, the average monthly payment for the F-150 in the third quarter rose to $893 a month; for the Ram 1500 it went up to $860; for the Chevy Silverado 1500, it went up to $808.

Pickup trucks have long been among the best-selling new vehicle segments in the United States. They are a huge part of the business. Ford didn’t get serious about EVs until Tesla threatened to build a pickup truck five years ago. This is when Ford took religion and plunged into electric vehicles and came out with an electric pickup truck to defend its core turf, while we’re still listening to Tesla threaten to come out with one. Ford lives and dies because of his pickups.

And the automakers have been taking them upscale for the last couple of decades because upscale is where the money is, and they’ve come out with high-end models and equipment packages that push pickups into the luxury segment, and they’ve raised the prices, and they’re making you huge profit margins on it.

But other popular vehicles also have large payouts. These are the average payouts for some models, according to Experian:

For all new vehicles, the average amount financed in the third quarter – after down payments, trade-ins with peak trade-in values, etc. — was up 10.4% from a year ago to $41,665, according to Experian, up 20% from Q3 2020 ($34,678).

The average new vehicle loan rate rose to 5.2% in the third quarter, up from 4.1% in the third quarter of 2021 and 4.2% in the third quarter of 2020.

So the average new vehicle loan payment increased 13% year over year to $700 a month. Over the past two years, the average payout has increased 24% (from $565 in Q3 2020).

Average loan terms for new vehicles increased slightly from a year ago, after declining in the prior year:

  • Q3 2019: 69.0 months
  • Q3 2020: 69.6 months
  • Q3 2021: 69.5 months
  • Q3 2022: 69.7 months.

But there are differences: Buyers with a credit rating of “super prime” have the shortest loan terms on average, while “near prime” and “subprime” have the longest loan terms on average:

  • Super first: 64.1 months
  • Prime: 71.2 months
  • Near Prime: 74.7 months
  • Subprime: 74.2 months.

The share of very long-term loans is growing; and interestingly, the share of short-term loans grew as well as perhaps buyers were looking to take advantage of the lower interest rates in that range. On the other hand, the share of the mid-range decreases, loans with a duration of 5-7 years:

  • Up: 85 months and beyond: Share grew to 1.8% of total loan originations in Q3 2022, compared to 1.3% share in Q3 2020.
  • Up: 73-84 months: Share grew to 34.6%, compared to 28.9% in Q3 2020.
  • Down: 61-72 months: the share fell to 36.7%, from 44.6% in the third quarter of 2020.
  • Down: 49-60 months: When I was in business, this was about as long as you could go; the share dropped to 16.6% from 19.7% in the third quarter of 2020.
  • Up: 48 months and less: Interestingly, the share jumped to 10.3% from 5.5% in 2020.

Who made the loan?

The share of credit unions jumped to 28.8% of all new vehicle loans originated in the third quarter of 2022 (red line), while the share of banks fell to 29.5% (blue) and the share of credit unions The automaker’s finance divisions (“captive finance”), while in first place, fell for the second consecutive quarter, to 35.3% (grey):

Bad sales.

The sky-high costs of new vehicles – and the sky-high payments they entail even at still relatively low interest rates – explain why, over the years, unit sales volume of new vehicles has been a dismal affair for more than two decades: Sales in 2022 they are on track to be where sales had been in the late 70s.

This year has been hampered by supply chain entanglements. But even Good-Times-2019 sales were lower than in 2000.

If the auto industry wants to sell more vehicles, it needs to do some serious soul-searching on price levels and level up (2022 includes WOLF STREET’s official estimate for December sales, better than last December):

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