First-Quarter Auto Payments Hit New All-time High
Jun 10th, 2020 @ 3:33 PM by Amber Nelson
Before the coronavirus spread completely to the U.S., auto loan totals and monthly payments reached new record highs in the 2020 first quarter, according to data from Experian.
The average total new vehicle loan rose to $33,739 with an average monthly payment of $560. Used car loans also hit new highs with the total loan amount averaging $20,723 and the monthly payment climbing to $397.
The rise in loans and payments is a reflection of increased demand for higher priced vehicles like SUVs and trucks as well. Today’s cars also come with more high-tech features than ever before, which also pushes prices up.
“Consumers have become comfortable with it,” said Melinda Zabritski, senior director of automotive financial solutions at Experian. “If they weren’t, we would see consumers go back to smaller, less expensive vehicles.”
Things may start to look different in the wake of the COVID-19 shutdowns and resulting economic fallout.
In fact, Zabritski has already noticed a change in consumer behavior since the first quarter.
“What I’ve noticed that seemed to change is leasing has come down. It dropped more significantly in April. So more loans (to buy) and less leasing,” she said. Leasing may have become less appealing than getting a lower rate and payment on used vehicles.
With the unemployment rate now at 13.3% and the economy in recession, fewer Americans will be able to qualify for auto funding and others may have to default on their current loans. Some lenders may tighten their lending standards to reduce risk. Wells Fargo has even shuttered all auto loans to its more than 1100 independent dealers, as the company worries about the potential for future defaults. That move is likely to hurt used-car buyers the most, although other financing options should still be available.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.