Customers carrying protecting masks take a look at Honda Motor Co. automobiles on the market at an AutoNation automotive dealership in Fremont, California, U.S., on Monday, Feb. 15, 2021.
David Paul Morris | Bloomberg | Getty Images
Don’t look now, however the common month-to-month loan fee for a brand new automotive is approaching $600 in accordance to Experian, which analyzes thousands and thousands of latest and used automobile loans.
“We went up higher amounts year over year in 2020 than we ever really have before and hit record highs in loan amounts and record highs in payments,” mentioned Melinda Zabritski, senior director for Experian’s automotive monetary options staff.
Experian’s newest auto financing report covers the fourth quarter of final yr when new automobile gross sales improved, however had been nonetheless properly beneath the tempo of gross sales in 2019.
Nonetheless, these taking out loans to purchase a brand new automobile borrowed a mean of $35,228, a rise of just about $2,000 from a yr earlier. As a outcome, month-to-month loan payments jumped $13 to a record excessive of $576 in accordance to Experian. Loans for used automobiles additionally hit all-time highs, with customers borrowing a mean of $24,467, up virtually $1,700 yr over yr.
Experian says month-to-month payments for used auto loans jumped $18, to $413 — the primary time the typical topped $400.
“I can certainly remember when that ($400) was the average payment for a new car,” mentioned Zabritski. “Those days are gone. We’re certainly over $400 and don’t expect to see that come down.”
Auto loans and payments are getting greater as a result of the worth for all automobiles is rising at a tempo few might have predicted a couple of years in the past.
What’s behind the upper sticker costs?
For new automobiles, the demand for bigger and costlier SUVs and pickups means patrons are prepared to pay extra. Buyers are also more and more choosing fashions with extra tech options from infotainment to driver-assist techniques that assist forestall accidents.
Used automotive and truck costs are climbing due to larger demand in the course of the Covid-19 pandemic. That additional tightened the already-strong used automotive market, the place roughly 40 million automobiles had been bought final yr in accordance to Zabritski.
Despite the elevated borrowing and better payments, the variety of customers defaulting or falling behind on their auto loans stays beneath the historic common.
“Most of the lenders I’m talking with and have had discussions with since the middle of last year have all said that they’re not seeing the delinquencies that they expected to see,” mentioned Zabritski. “So consumers have done a good job of staying current and keeping those payments going.”