Car loan costs are on the rise, which is news to no one who hasn’t been living in a cave. According to credit agency Experian, the average monthly car loan rose $15 last year, reaching $523. The company’s recent report entitled, “State of the Automotive Finance Market Report,” found that the average new vehicle loan amount also hit a new record of $31,455 in the first quarter of 2018, which represents a $921 leap from the previous year. For used vehicles, the typical payment grew by $410 to $19,536.
“The dream of owning a new vehicle is becoming more elusive to the average American,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions in a news release. “To reverse the trend, dealers and lenders need to better understand the data and explore different options to make new vehicle ownership accessible and appealing.”
One of the ways dealers are keeping vehicle ownership in reach of customers is by extending loan term lengths. While 72-month loans remain the most common, lenders are beginning to offer more 85- to 96-month loans to keep payments affordable. (Specifically, the typical new vehicle loan term is 69.03 months on average, while the average lease is 36.53 months.)
The Experian report also noted that used vehicle loans in the first quarter of 2018 came in at a new all-time high average of $19,536, and the total amount of outstanding loan balances hit a new record of $1.108 trillion.
There are changes on the leasing side, as well. The percentage of new vehicles that are leased fell to 29.83 percent in the first quarter of 2018, a drop from 2017 Q1’s 31.06 percent. In the used vehicle market, leases rose from 3.71 percent of transactions in the first quarter of 2017 to 4.01 percent in the first quarter of this year. A total of 35.9 percent of prime and super prime borrowers (defined as credit scores of 661 or higher) chose to lease in 2018 Q1. This number is down from 37.4 percent in the same quarter of last year. Nonprime borrowers (those with credit scores of 600 to 660) were also less likely to lease, with percentages falling from 34.1 percent in 2017 to 32.6 percent in 2018.
Despite the bad news of rising interest rates, there was good news on delinquencies. A total of 1.9 percent of outstanding vehicle loans and leases were delinquent by 30 days in the first quarter of 2018, down from 1.96 percent in 2017. The share of 60-day delinquencies held at 0.67 percent.
