Whether U.S. consumers are purchasing a new car or a used model, the odds are very high that an auto loan is involved. Some 85.1% of all new car buyers and 53.8% of used car buyers financed vehicle purchases in the fourth quarter of this year.

The total U.S. open automobile loan balance for the fourth quarter of 2017 was $1.13 trillion, up from $1.07 trillion in the fourth quarter of 2016 and up from $987 billion in the fourth quarter of 2015. The total is 5.3% higher compared with the total in the fourth quarter of 2016. Banks hold 32.6% of the outstanding balance while dealer captive finance holds 27.7%, credit unions hold 22.9% and finance companies hold 16.7%.

The average loan amount for a new vehicle reached $31,099, up $770 (about 2.5%) compared to the prior quarter’s average. Loans to purchase a used car averaged $19,291, up $298 (about 1.5%) quarter over quarter. These are record highs for both new and used car averages. 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 3.17% interest on a new car purchase in the fourth quarter. A deep-subprime buyer (credit score 300 to 500) paid an average interest rate of 13.76% 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 3.90% to buy a used car from an independent dealer while a deep subprime buyer paid an average interest rate of 20.28%. Interestingly, rate increases rose sequentially for super-prime borrowers and dropped a little for deep subprime borrowers.

Other data points culled from the study:

• The average credit score for a new vehicle loan rose by two points year over year to 713.
• The average credit score for a used vehicle loan increased two points to 656.
• In the fourth quarter, the average monthly payment for a new vehicle hit $515, up by $8.
• The average interest rate for new vehicle loans to all borrowers rose to 5.11%, up 37 basis points.
• Loan terms for new and used vehicles increased from a year ago to reach over 69 months and over 64 months, respectively.
• Leases accounted for 28.99% of all new car transactions.
• Lease terms rose slightly to average 36.33 months in the fourth quarter.
• Nearly 20% of loan balances are owed by deep subprime (2.86%) and subprime borrowers (16.93%) with credit scores between 501 and 600.

The full report is available after free registration from the Experian website.

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