US Auto Loans Up 6% Year Over Year, Total Now $1.12 Trillion
Rising auto sales have also boosted the amount of money Americans have borrowed to pay for those cars. U.S. buyers now owe a total of $1.21 trillion on purchases of new and used vehicles.
Whether U.S. consumers are purchasing a new or a used car, the odds are very high that an auto loan is involved. Some 85.5% of all new car buyers and 53.1% of used car buyers financed vehicle purchases in the third quarter of this year.
The total U.S. open automobile loan balance for the third quarter was $1.12 trillion, up from $1.06 trillion in the third quarter of 2016 and up from $968 billion in the same quarter of 2015. Banks hold 33.0% of the outstanding balance while dealer captive finance holds 22.8%, credit unions hold 27.2%, and finance companies hold 16.9%.
The average loan amount for a new vehicle reached $30,329, up $291 (about 1%). Loans to purchase a used car averaged $19,291, up $56 year over year. The data were reported earlier this week by Experian Automotive.
The better a car buyer’s credit rating, the lower the available interest rate on a car loan. No surprise there, but the gap is substantial. A super-prime buyer (credit score of 781 or higher) paid an average of 3.1% interest in the third quarter. A deep-subprime buyer (credit score 300 to 500) paid an average interest rate of 13.95% on a new car.
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The gap on used cars, especially at independent dealers that often finance their own sales, was even wider. A super-prime borrower paid an average interest rate of 3.86% to buy a used car from an independent dealer while a deep subprime buyer paid an average interest rate of 20.39%. Interestingly, rate increases were a few basis points higher for super-prime borrowers than for deep subprime borrowers.
Other data points culled from the study:
- The average credit score for a new vehicle loan rose by one point to 713 year over year.
- The average credit score for a used vehicle loan increased four points to 659.
- In the third quarter, the average monthly payment for a new vehicle hit $502, up by $6.
- The average interest rate for new vehicle loans to all borrowers rose to 5.1%, up 39 basis points.
- Loan terms for new and used vehicles increased from a year ago to reach 69 months and 64 months, respectively.
- Leases accounted for 29% of all new car sales.
- Lease terms slipped slightly to average 36.09 months in the third quarter.
Nearly 20% of loan balances are owed by deep subprime (3.87%) and subprime borrowers (16.06%) with credit scores between 501 and 600. Loan terms averaged 69 months in the third quarter, up by 0.6 months compared with the third quarter of last year.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
