Americans Borrow Record Amount to Buy Cars

Americans borrowing record amount to buy cars
Daniel Acker/Bloomberg via Getty Images
By Philip LeBeau

A combination of higher prices for new cars and relatively low rates for auto loans means Americans are borrowing a record amount to pay for their new rides.

According to Experian Automotive, which tracks millions of auto loans written each quarter, the average amount borrowed by car buyers last quarter climbed above $27,000 for the first time ever.

"It's not surprising buyers are borrowing more," said Melinda Zabritski, Experian's senior director of automotive credit. "If you look at the most popular segments, they are full-size pickups and SUVs. It's hard to find one of those models new and fully loaded for under $30,000."

According to Experian, the average auto loan in fourth quarter 2013 was $27,430 -- an increase of $739 compared with the same period of 2012. The average used car loan was $345 higher, coming in at $17,974.

Those with non-prime credit ratings -- or credit scores between 620 and 679 -- had the highest average auto loan. For these borrowers, the average new car loan rose more than $1,500, to a new high of $29,385.

And as their loans rise, keeping the monthly payment as low as possible has become more of a challenge -- even as car buyers stretch their loans over longer periods of time.
According to Experian, the average monthly payment for a new car auto loan rose $11 to $471 in the fourth quarter; the average monthly payment for a used car loan edged $4 higher, to $352.

Not surprisingly, those with subprime credit ratings -- credit scores between 550 and 619 -- had the highest average monthly payment, of $499.

"I expect that monthly payment to continue rising and go above $500," Zabritski said. "There's always a tipping point where buyers say, 'I can't pay that much every month.' So far, we haven't seen the flashing lights go off indicating buyers are at a tipping point."

The payments are rising despite an increasing number of car buyers opting to stretch their loans over six or seven years. According to Experian, a record 20 percent of all new car auto loans in the fourth quarter were more than six years in length.

Overall, the average auto loan is scheduled to last 5 years and 3 months -- but that could be rising.

J.D. Power said last week that February was on track to have one-third of new car auto loans last at least six years.

Bigger auto loans shouldn't come as a surprise, given the average transaction price -- or the amount buyers are paying at dealerships -- climbed 1.9 percent to $32,160 in February, according to Kelley Blue Book. It's the second straight month transaction prices came in above $32,000, as car buyers are adding navigation systems, in-car connectivity and infotainment systems to their vehicles.

Within the industry, automakers such as Ford (F) and Volkswagen have average transaction prices higher than $34,000. But for February, the highest average transaction price among the largest mass automakers was General Motors (GM), where the average model sold at dealerships for $35,380.

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The more stuff they put on a car the more the cost goes up = the EPA and FED GOV added a lot to the price .

March 13 2014 at 7:26 AM Report abuse +1 rate up rate down Reply

Nothing feels as good as knowing you don't have a car payment. I'll take my 10-year old car over a new one any day. It works just fine and insurance costs are low ($30/month from Insurance Panda).

Seems most Americans and certainly the FED government have not learned a thing from 2008.

March 05 2014 at 1:44 PM Report abuse rate up rate down Reply

Maybe one wouldn't have to borrow so much for so long if one got rid of the multiple cell phones in the family. And who really needs cable/satellite TV for their home or car? Those items alone amount to over $100 a month to go on their car or home loan. It isn't an issue of lack of money, it's more an issue of poor financial planning/budgeting.

March 04 2014 at 2:56 PM Report abuse rate up rate down Reply

New cars are outrageously expensive. Here's a tip, don't buy new. Let some other schmuck take the hit on the initial depreciation and buy a one or two year old car. They still have the remaining factory warranty, sometimes more if they are "certified" used. Pay cash, or drive until after it is paid off. I haven't purchased a "new" car since 1990, and most of the years since then I have not had a car payment. The money you save by buying used and not having a payment can be invested for retirement or paying off your mortgage.

March 04 2014 at 10:49 AM Report abuse +1 rate up rate down Reply

One way to help bring America back is to buy American no matter what you purchase. Forget the brick and mortar stores for they proven they are greedy, buying cheap selling high. Maybe good for the business but bad for the country. When we loose jobs unemployment and welfare, etc. goes up and we will all pay for it.

March 04 2014 at 10:25 AM Report abuse -1 rate up rate down Reply

Hint; over 91 million not in the labor force which means they aren't in the work force either mostly due to the poor economy that causes thoses still able to buy vehilces to borrow more.

March 04 2014 at 9:11 AM Report abuse -3 rate up rate down Reply

It's more than the weather slowing auto sales but the real problems won't go away. People borrow more because they have less to put down due to the crappy economy.

March 04 2014 at 9:06 AM Report abuse -2 rate up rate down Reply

The real economy stinks and vehicle sales are being blamed on the weather so do they really know why people are borrowing more? Experian is the credit company yet their partner TALX ruins your credit by supporting companies that wrongfully terminate workers with false misconduct charges! You lose your job an then they fraudulently try to stop your unemployment benefits! Since age discrimination already hurts the older worker's chance of getting another job millions of people are hurt by these crooked partner ships thus the vehicle sales lose consumers which hurts sales even more!

March 04 2014 at 8:54 AM Report abuse -2 rate up rate down Reply
Lifes a Beach

I'm putting 40 down but I'll borrow even more, good stuff aint cheap.

March 04 2014 at 8:45 AM Report abuse -3 rate up rate down Reply

What do you expect with the outragious price for a new car?

March 04 2014 at 8:04 AM Report abuse +3 rate up rate down Reply