Car buyers in the United States are increasingly seeking more expensive cars, assuming larger car loans to the buy vehicles and are taking a longer time to pay for their purchases.
The result of the trend, according to the credit company Experian, are the biggest numbers the automotive industry has experienced.
Car loans reach new high
Consider the car loan statistics for the first quarter of 2016 from data compiled from millions of auto loans:
The average auto loan in the United States is now $30,032. It’s the first time the amount borrowed to buy a new care surpassed $30,000.
The average month auto payment is now $503. It’s the first the average monthly car payment has exceeded $500.
The average term for an auto loan is 68 months (5 years, 8 months). It’s the longest loan duration Experian analysts have ever documented.
“This is kind of the natural evolution we would expect in conjunction with vehicles costing more,” said Melinda Zabritski, Experian’s senior product director of automotive finance.
Experian tracks millions of auto loans, which totaled more than $1 trillion in value in the first quarter of 2016. (Source: https://personalmoneynetwork.com/short-term-loans/)
According to the company, auto and payment for auto loans have steadily increased for the past seven years. The increased corresponds to the increase in the average price of a new car.
TruCar, the industry pricing monitoring company, said the average price of a new car in the United States in May 2016 was $32,994. It’s a 3.4 percent increase from one year ago.
Industry experts believe the $500 monthly payment threshold is significant because it’s the amount many buyers are determined not to surpass. It’s the major reason for an increase in car leases, the financial option in which the aver monthly payment is $406.
The increase in the length of loans is also directly the result of the $500 payment plateau. While the average term length has reached more than 5 1/2 years, almost one-third of auto loans have repayment terms of 73-84 months.