Auto Loan Debt Hits a Nine-Year High
Nov 26th, 2014 @ 11:16 PM by Amber Nelson
During the third quarter of this year, Americans borrowed more in car loans than they have in the past nine years, according to the latest quarterly Household Debt and Credit Report from the Federal Reserve Bank of New York, marking the 14th consecutive quarter of increases in U.S. auto loan balances.
Total car loan originations topped $105 billion in the latest quarter, a $29 billion increase from the second quarter and a level not seen since before the Great Recession. Auto lenders have loosened their loan requirements over the past several years, as investors have created demand for auto-loan backed securities, opening the door for more loans among subprime borrowers.
The increase in car loan borrowing was not the only category where consumers stepped up their spending. “Outstanding household debt, led by increases in auto loans, student loans and credit card balances, has steadily trended upward in recent quarters,” said Wilbert van der Klaauw, senior vice president and economist at the New York Fed. He added, “It appears that the deleveraging period has come to an end and households are borrowing more.”
Overall household debt increases to $11.71 trillion in the third quarter, up 0.7 percent or $78 billion from the second quarter. Americans are slowly borrowing their way back up to the 2008 third quarter peak of $12.68 trillion before the financial crisis hit.
Among the other categories to post significant increases were an $11 billion jump in credit card debt and an $8 billion rise in student loans. Mortgage debt inched up 0.4 percent, to a total of $8.13 trillion in the third quarter.
The only area of consumer debt that did not grow was home equity lines of credit. Americans shaved off $9 billion in debt in third quarter in that category, a trend that has been building for three years.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.