Average Car Loan Amounts at New Record Highs
Dec 12th, 2019 @ 1:53 PM by Amber Nelson
Americans are paying more than ever before for new and used vehicles, according to Experian PLC, a result of pricier tech features in new cars.
In the third quarter, the average amount for a new-vehicle loan jumped 5% in the past year to $32,480 while the average used-car loan rose 3% to $20,466. Total U.S. auto debt has grown to $1.32 trillion, up $50 billion from a year ago.
“Not only are consumers preferring SUVs which are typically more expensive than their sedan counterparts, but they’re also choosing not to skimp on in-vehicle features and content — a positive indicator of consumer confidence in the economy,” said Oliver Strauss, chief economist at ALG, a subsidiary of TrueCar in a Bloomberg article.
Those features include voice-activated entertainment and communication systems as well as semi-autonomous driver-assist technology.
Those higher car loan amounts have pushed monthly payments up as well. The average payment on a new vehicle loan is close $550 a month, a new record high.
To keep up with those higher price tags and payments, buyers are stretching out the length of their loans as well. The average loan length is now 69.28 months, just under six years. Used cars carry an average term today of 64.89 months. Lease terms are also increasing, averaging 36.54 months, up from 36.18 months last year.
Longer terms and higher debt put buyers at greater risk of default. According to the New York Federal Reserve, 4.71% of all car loans are in serious delinquency – those with payments late by 90 or more days – an increase from 4.27% the year before.
In terms of car buyer credit profile, 51.24% of all buyers have either primer or super prime credit scores, the highest percentage in over 10 years. That higher credit profile is likely keeping delinquencies relatively low.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.