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Car Loans In U.S. Reach $1 Trillion | DrivingSales News

Car Loans In U.S. Reach $1 Trillion For The First Time

November 17, 2015 0 Comments

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Amid strong car sales, rising prices and low interest rates, Americans now owe a record amount of $1 trillion in car loans, marking the highest figure in the country’s history.

Jason Laky, automotive business leader at credit agency TransUnion, the company that reported the data, said the loan balances have been driven up by the three aforementioned factors, explaining borrowers with top credit scores can now get loans for less than 3 percent.

“There are a lot of lending choices for consumers, a lot more competition,” said Laky. “That’s made financing more widely available and very attractive.”

According to sales tracker Autodata, new car sales are up almost 6 percent so far this year. Overall, the industry is in a position to sell a record number of cars to U.S. consumers in 2015. However, the amount owed is up 11 percent, an indication of the increase in the size of car loans due to rising prices.

The average borrowed amount is approximately $21,700, and buyers owe almost $18,000 on average. According to sales tracker TrueCar, the average new car purchase price is currently $32,529, with the average car loan balance rising faster than it is for mortgage loans.

TransUnion found that the average balance across all auto loan accounts was $14,515 in Q3 2015, indicating a 2.7 percent increase year-over-year, but the slowest pace of average balance growth since Q4 2011.

Laky said low interest rates and longer loan terms have kept the average payment fairly consistent over the past five years, with it now standing at just under $400 per month, with the majority of car buyers able to handle their payments. Only about $9 billion of loans are 60 or more days past due, which equals less than 1 percent of the total loan volume. This delinquency rate is lower than the rates for either mortgages or credit cards.

The report indicates the majority of car buyers have reasonably good credit, with subprime loans making up only 15 percent of the total loan volume. Laky said falling unemployment and strong job growth over the past year are other factors that are helping to push car loan balances higher.

“When Americans have jobs, they’re going to go out and purchase cars with confidence,” said Laky. “More consumers have access to auto loans, yet delinquencies remain low as they continue to responsibly manage their payments. Consumers are taking on more and bigger auto loans in today’s low-rate environment, but we see no cause for concern as delinquencies remain steady.”

About the Author:

The DrivingSales News team is dedicated to breaking the relevant and the tough stories affecting car dealers. Have questions for DrivingSales News? Reach the team at news@drivingsales.com.

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