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Electric car buyers have much better credit than ICE shoppers

All those stories of reasonable people waiting in line or jumping through hoops to pay the high-priced premium for a new electric car?

Let’s call them outliers for now, as a new study verifies that electric car buyers are less likely to take on too much debt than those who buy traditional gas-powered cars.

The study, from credit giant TransUnion, to S&P Global Mobility, and combining the former’s credit data with the latter’s vehicle registrations and forecasts, couldn’t be more comprehensive in size and scope. . The massive data crunch looked at about 33 million US consumers who bought a new car between 2019 and 2021.

All in all, electric car buyers have so much better credit that they’ve shifted the divide between the budget and premium sectors. Those who TransUnion considers as mainstream electric vehicle buyers score higher on average than internal combustion engine (ICE) luxury buyers — 775 versus 769, respectively.

EV vs ICE Credit Profile - TransUnion

EV vs ICE Credit Profile – TransUnion

A huge difference in credit scores leads to a huge difference in the terms of the loan and ultimately in what the customer can afford. According to TransUnion, a credit score of 735 – the average for mainstream ICE buyers – corresponds to an average APR of 4.3%, while an average of 775 for mainstream electric vehicle buyers means is 2.8%. That relates to the average loan-to-value ratio – a percentage of the total loan amount to the vehicle’s price – of 102.2 percent for prime ICE buyers compared to 88.8% for non-primary ICE buyers. buy an electric car.

Yes, that means electric car buyers are also paying lower.

And a lower-risk credit profile seems to extend beyond the factors typically included in credit ratings. Even when comparing EV and ICE buyers with the same credit scores, EV buyers had a lower “rate of serious crime.”

2023 Hyundai Tucson Plug-In Hybrid

2023 Hyundai Tucson Plug-In Hybrid

TransUnion does not provide details on how the budget and premium markets are divided. But it clearly filters out hybrid car buyers and is built on the expectation that the all-electric car market will grow from about 5% today to about 40% by 2031.

“Although Tesla dominates the market today, it is predicted to fall below 20% market share by 2025 as new entrants enter the electric vehicle sector,” the study said.

Working around the arbitrage probably won’t last

Today, there is a huge price rift between ICE vehicles and EVs brings EVs closer to luxury models — perhaps because many of them are luxury models. According to Kelley Blue Book, the average new car in the US currently costs more than $48,000, while the average price of an EV is around $67,000. With tram and ICE model is expected to achieve parity price mid-decade, that’s an anomaly that probably won’t last.

The demographic and credit risk findings confirm anecdotal comments some executives have made about people buying their popular electric models. Hyundai executives, for example, have noted that Ioniq 5 electric SUV is attracting early buyers who could have bought a much more expensive luxury car.

2022 Hyundai Ioniq 5

2022 Hyundai Ioniq 5

To complement the large-scale data, the companies conducted a survey of about 1,500 vehicle owners in the US about which electric vehicle buyers are most interested in, plus their shopping preferences and preferences. finance.

The survey found that a higher percentage of electric vehicle shoppers do their vehicle and finance research online — with double the online finance completion rate (32% vs. 16%).

That means electric vehicle owners are more likely to understand — and want to understand — what they can afford before making an actual purchase.

Is low risk behavior always positive for dealers?

That said, it is still debatable which entities such as agents, custodial credit companies or separate lenders view this as a positive — and, to the extent, whether those with pristine credit is most likely to generate profits for the agent or not to become a repeat buyer. Agents often run a specific percentage against a negotiated bulk rate for buyers in certain risk groups, negotiated in advance with lenders.

Meanwhile, people with better credit scores are more likely to cross-shop and are more aware that there’s a tick, while those with lower credit may also be more likely to make a purchase. more — and choose from top-of-the-line, super affordable car or accessory options that might not.

Design a future Honda dealership to sell EVs - 2022

Design a future Honda dealership to sell EVs – 2022

TransUnion’s conclusions even give opportunity for dealers which some manufacturers are currently leaving on the table: “More than half of electric vehicle owners/considers want to fund their next home electric vehicle charging station,” it said.

For years, dealers were hesitant about spending more time and resources on sell and support electric vehiclesbut for us, this study highlights another reason why they might focus more on them.

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