Monthly Auto Loan Repayments Hit All-Time Highs, Experian Says
Customers wearing face masks look at Honda Motor Co. vehicles for sale at an AutoNation dealership in Fremont, Calif., United States, Monday, February 15, 2021.
David Paul Morris | Bloomberg | Getty Images
Don’t look now, but the average monthly loan payment for a new car is approaching $ 600 according to Experian, which analyzes millions of new and used vehicle loans.
“We have increased the amounts year over year in 2020 than we have ever done before and have reached record levels in terms of loan amounts and record payments,” said Melinda Zabritski, Senior Director of the Experian Automotive Financial Solutions team.
Experian’s latest auto finance report covers the fourth quarter of last year, when new vehicle sales improved but were still well below the sales pace in 2019.
Nonetheless, those who took out loans to purchase a new vehicle borrowed an average of $ 35,228, an increase of almost $ 2,000 from the previous year. As a result, monthly loan payments jumped $ 13 to a record high of $ 576 according to Experian. Used vehicle loans have also reached all-time highs, with consumers borrowing an average of $ 24,467, up nearly $ 1,700 year over year.
Experian says monthly payments for used auto loans jumped from $ 18 to $ 413 – the first time the average has exceeded $ 400.
“I certainly remember when that ($ 400) was the average payment for a new car,” Zabritsky said. “Those days are gone. We’re definitely over $ 400 and don’t expect to see that go down.”
Auto loans and payments are increasing because the price of all vehicles is increasing at a rate that few could have predicted a few years ago.
What is behind the higher sticker prices?
For new vehicles, the demand for bigger, more expensive SUVs and pickup trucks means buyers are willing to pay more. Buyers are also increasingly opting for models with more technological features, ranging from infotainment to driver assistance systems that help prevent accidents.
Prices for used cars and trucks are rising due to increased demand during the Covid-19 pandemic. This has further tightened the already strong used car market, where around 40 million vehicles were sold last year, according to Zabritsky.
Despite the increase in borrowing and higher payments, the number of consumers defaulting or late on their auto loans remains below the historical average.
“Most of the lenders I speak with and have had discussions with since the middle of last year all said they didn’t see the delinquencies they expected to see,” Zabritsky said. . “So consumers have done a good job of staying up to date and maintaining these payments.”