By Selina Stoller, Summit Consumer Receivables Acquisitions, LLC
Americans are borrowing more than ever to buy new and used vehicles, despite rising interest rates.
According to CNBC, analysis of auto loans in the fourth quarter by Experian shows the average new vehicle loan hit a record high $31,099, while the average loan for a used vehicle climbed to a record of $19,589.
“I think we’re certainly at a point where affordability is a question,” said Melinda Zabritski, Experian’s senior director of automotive finance solutions. “When you look at how much income you need to support that payment, it certainly is higher than your average individual income.”
In the fourth quarter of 2017, the average monthly payment for a new vehicle hit an all-time high of $515, while the average used auto loan payment hit a record $371 per month.
The increase in monthly payments and loan total extends the trend of consumers paying more and taking longer to pay off vehicles they are buying. Americans are extending a new car loan over 69 months compared to 64 for a used vehicle.
Prices for new vehicles have climbed more than 10 percent in the last five years, making consumers extend their loan payments (in 2013 the price of a new vehicle averaged $31,773).
One reason behind higher spending rates is that consumers are buying more trucks and SUVs, which are usually more expensive. Another factor is rising interest rates.
“For some buyers, this is going to come as a surprise,” said Jessica Caldwell, executive director of Industry Analysis for Edmunds.com. “For buyers with average credit scores, the rates are higher than a couple of years ago, and that will mean a higher monthly payment.”
In February 2018, the average interest rate for new financed vehicles was 5.2 percent, up from 4.9 percent a year ago and 4.4 percent five years ago.
- 5 Mar, 2018
- Josh Smith