US Consumers Owe $1.17 Trillion in Car Loans

Whether U.S. consumers are purchasing a new car or a used model, chances are that an auto loan is involved. More than 85% of all new car buyers and nearly 53% of used car buyers financed vehicle purchases in the third quarter of 2018.

The average loan amount to purchase a new vehicle reached $30,977, up $647 (about 2.1%) compared to the same period last year. Loans to purchase a used car averaged $19,861, up $570 (about 3.1%) year over year. Third-quarter new and used car average prices and other data were reported Thursday by Experian Automotive. The average used car price reached a record high in the quarter.

The better a car buyer’s credit rating, the lower the available interest rate on a car loan. No surprise there, but the gap between the top and the bottom is vast. A super-prime buyer (credit score of 781 or higher) paid an average of 3.68% interest on a new car purchase in the third quarter. A deep-subprime buyer (credit score of 300 to 500) paid an average interest rate of 14.41% 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 4.37% to buy a used car from an independent dealer, while a deep-subprime buyer paid an average interest rate of 19.72%.

The total U.S. open car loan balance for the first quarter of 2018 was $1.17 trillion, up from $1.12 trillion in the third quarter of 2017 (4.7%) and from $1.06 trillion in the third quarter of 2016 (10.4%).

Banks hold 31.0% of the outstanding balance, while dealer captive finance holds 30.1%, credit unions hold 22.6% and finance companies hold 10.5%.

Other data points culled from the study:

  • The average credit score for a new vehicle loan was up a point at 717 year over year.
  • The average credit score for a used vehicle loan increased two points to 661.
  • In the second quarter, the average monthly payment for a new vehicle hit $530, a year-over-year increase of $28 and a new all-time high.
  • The average interest rate for new vehicle loans to all borrowers rose to 5.73%, up 63 basis points year over year.
  • Loan terms for new vehicles were down by 0.53 months at 68.47 months compared with the third quarter of last year; terms for used vehicle loans rose to 64.36 months, up by 0.41.
  • Leases accounted for 33.93% of all new car transactions, down about 0.1 percentage points compared with the third quarter of 2017.
  • Lease terms rose slightly to average 36.18 months in the third quarter.

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