US Auto Loans Up 6% Year Over Year, Total Now $1.12 Trillion

Print Email

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.

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.

I'm interested in the Newsletter