Auto Loan Growth Boosts June Consumer Borrowing
Aug 7th, 2013 @ 2:54 PM by Amber Nelson
American consumers borrowed more in June, with most of the increase coming from car loans and student debt, according to a recent report from the Federal Reserve Bank of New York.
Total consumer borrowing grew $13.8 billion in June from May, to a seasonally adjusted $2.85 trillion, the highest level on record.
While the Fed’s survey doesn’t break down exact numbers on auto loan data, the non-revolving credit category, which includes student and auto loans, increased by $12.6 billion in June to an unadjusted $1.987 trillion. Federal student loans grew by $3.3 billion, which means that a jump in car financing probably made up the rest of the non-revolving credit increase.
“Auto credit seems to be pretty widely available and the demand for new cars has been strong as well, and both of those are probably going to continue through the end of the year,” said Tom Simons, an economist at Jefferies LLC in New York, who projected a $14 billion increase in credit in a Businessweek article . “We still see a consumer that is reticent to borrow in order to make purchases other than autos.”
And as Simons indicated, credit card debt has not seen a major increase all year. In June, the revolving credit category, made up primarily of credit card transactions, fell $2.7 billion and is currently 16.5 percent below its peak in July 2008.
By comparison, student and car loan debt have increased $312.6 billion over the past two-and-a-half years, while credit card debt has inched up just $16 billion.
Since the financial crash, Americans seem to feel safer borrowing for cars and college than they do for more mundane needs or for big, one-time purchases. However, as the unemployment rate continues to tick downward and consumer confidence slowly recovers, we are likely to see greater borrowing of all types towards the end of the year and into 2014.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.