Americans are paying more every month for a new vehicle and making those payments for a longer time than ever.
The latest data on auto loans by Experian shows Americans are taking out record-size loans, making larger monthly payments than ever before and extending their loans farther than ever.
The numbers from millions of auto loans tracked in the first quarter of this year are striking.
Average auto loan: $30,032 — the first time the amount borrowed to buy a new vehicle has topped $30,000.
Average monthly payment: $503 — the first time the average auto payment has gone over the $500 mark.
Average term for an auto loan: 68 months — this is the longest average term ever seen by Experian.
“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.
Auto loans and payments have been growing steadily over the past seven years as the price of new vehicles has climbed. TrueCar said the average transaction price for a new vehicle hit $32,994 in May, up 3.4 percent on the same month a year ago.
What’s noteworthy about Experian’s report is the data that show consumers are adjusting to the reality of what it costs to buy a new vehicle.
For example, loan payments topping $500 is significant because consumers have long expressed a desire to keep their monthly bill under $500 if possible. It’s the reason leasing, where the average monthly payment was $406 in the first quarter, has become more popular in recent years.
“Five-hundred dollar monthly payments could change the psychology for [the] auto buyer,” Zabritski said. “Buyers want that monthly payment as low as possible.”
That’s the reason consumers are stretching out auto loans farther than ever to a new record of 68 months. The longer the term, the lower the monthly payment. In the first quarter, almost a third of all auto loans came with repayment terms of 73-84 months, which was the most popular term among new vehicle buyers.
Zabritski says the growth in auto loans is worth watching to make sure consumers don’t wind up going “upside down” on auto loans, but she feels the auto loan market is generally healthy.