The average car payment for new vehicles was a record-high $738 per month in the fourth quarter of 2023, a 2.5% increase from the fourth quarter of 2022. The average car payment for leased vehicles increased at a comparable 2.4%. However, the average car payment for used vehicles increased by just 0.4%.
LendingTree looked at payments, originations, term lengths, delinquencies and more to get a full picture of U.S. auto loan debt and trends. Here’s our 2024 roundup of auto loan statistics.
You are watching: Do Most People Finance Cars
Auto loan statistics 2024: Average car payments to financing by credit score
Average monthly car payments for new, new leased and used vehicles jump year over year
The average car payment for a new vehicle is a record $738 monthly, according to fourth-quarter 2023 data from Experian — up 2.5% year over year. Meanwhile, new lease payments average $606 (up 2.4%). With the lowest jump at 0.4%, used cars have the lowest average monthly payment at $532.
Annual changes in average monthly car payments
2022 payments2023 paymentsDifference ($)Difference (%) New vehicles$720 $738 $18 2.5% Used vehicles$530 $532 $2 0.4% New vehicle leases$592 $606 $14 2.4%
Source: Experian State of the Automotive Finance Market, Q4 2022 and Q4 2023.
Those with credit scores of 601 to 660 (in the nonprime or fair ranges) and 501 to 600 (in the subprime or poor and fair ranges) saw the highest average monthly payments for new vehicles, at $782 and $774, respectively.
Average monthly payments by credit score range
New vehiclesUsed vehiclesNew leased vehicles All$738 $532 $606 781 to 850 (super prime)$703 $515 $587 661 to 780 (prime)$747 $526 $611 601 to 660 (nonprime)$782 $547 $631 501 to 600 (subprime)$774 $548 $639 300 to 500 (deep subprime)$740 $533 Not available
See more : Es In Finance
Source: Experian State of the Automotive Finance Market, Q4 2023.
Increase in new car payments higher than hike in new vehicle prices
The year-over-year hike of 2.5% in the average new car payment is less than two percentage points higher than the new vehicle price increase of 0.7% over the past year, according to the January 2024 BLS consumer price index.
While the supply chain has largely recovered from the factory shutdowns and supply chain shortages caused by the COVID-19 pandemic and geopolitical tensions, auto manufacturing still isn’t at pre-pandemic levels. Meanwhile, many consumers have been waiting for increased availability since the shortages began, meaning demand is up — keeping inventory low and prices high. Plus, inflation skyrocketed to a 40-year high, causing more pain for consumers.
The used car market is friendlier to consumers, as used car and truck prices are down by 3.5%. During the pandemic, many shoppers turned to the used car market amid the shortages and price hikes in the new car market. Now, as new car inventory picks up, demand has shifted from the used car market.
Average auto loan amounts above $40,000 for new vehicles
Average auto loan amounts reached $40,366 for new vehicles and $26,685 for used vehicles in the fourth quarter of 2023, according to Experian. New vehicle loan amounts rose from an average of $40,184 last quarter. Meanwhile, the average auto loan amount for used vehicles is down from $27,167 in the third quarter.
New car buyers in the nonprime/fair credit tier (601 to 660) take out the largest loans — $43,605, on average. Borrowers with credit scores in the tier above — prime (661 to 780) — take out the most for used cars, $28,074, down from last quarter ($28,504).
Average auto loan amounts by credit score range
New vehiclesUsed vehicles All$40,366 $26,685 781 to 850$36,630 $27,331 661 to 780$42,244 $28,074 601 to 660$43,605 $26,362 501 to 600$40,366 $22,987 300 to 500$35,718 $20,153
See more : Es In Finance
Source: Experian State of the Automotive Finance Market, Q4 2023.
Americans owe $1.607 trillion in auto loan debt
Overall vehicle debt has increased by 86.2% between the fourth quarter of 2013 ($863 billion) and the fourth quarter of 2023 ($1.607 trillion), according to the Federal Reserve Bank of New York.
In those 10 years, the only dip came in the second quarter of 2020 — the first full quarter amid the pandemic.
Auto loans account for 9.2% of American consumer debt
While mortgages take the lion’s share of American consumer debt at 70.0% — according to the New York Fed — auto loans account for 9.2%. Auto loans and student loan debt both exceeded $1.600 trillion in the fourth quarter of 2023, with auto loans ($1.607 trillion) slightly surpassing student loan debt ($1.601 trillion).
Americans borrow $57.1 billion a month in auto loans in 2023
Americans took out $36.7 billion a month in auto loans in the fourth quarter of 2013. Ten years later in the fourth quarter of 2023, they borrowed far more: $55.0 billion a month, according to the New York Fed.
Here’s a quarterly look dating to 2011:
Americans in their 30s, 40s take out biggest auto loans
Americans in their 30s and 40s took out the largest auto loans in the fourth quarter of 2023, according to the New York Fed, borrowing $35.7 billion and $38.0 billion a month, respectively.
Those in their 50s borrowed billions less ($30.8 billion), followed by young adults ages 18 to 29, who borrowed $26.2 billion. The oldest Americans borrowed the least.
When you break it down monthly over that fourth quarter of 2023, Americans younger than 50 took out $33.3 billion in auto debt. That compares with $20.6 billion for those 50 and older.
Americans with highest credit scores take out biggest auto loans
Meanwhile, those with the best credit scores borrow the most. In the fourth quarter of 2023, borrowers with credit scores of at least 720 took out $87.8 billion in auto loan debt. The remaining credit tiers accounted for $77.1 billion combined, according to the New York Fed.
Auto loan originations by credit score ($ billions)
Less than 620620 to 659660 to 719720 to 759760+ Q1 2023$23.4$16.3$34.9$27.5$59.5 Q2 2023$29.8$18.5$38.4$28.4$63.8 Q3 2023$28.0$18.8$38.8$27.6$66.1 Q4 2023$25.5$17.0$34.6$25.3$62.5
Source: New York Fed Consumer Credit Panel/Equifax data.
Average auto loan term shows it’s taking time to pay back these loans
See more : Can You Get Financing For Owner Operators
The average auto loan term for new vehicles is 67.9 months, or less than six years, according to Experian. Used car loans, despite being significantly smaller on average, are close behind at 67.4 months.
Average term lengths by credit score range (in months)
New vehicle loansUsed vehicle loansNew leased vehicles All67.967.436.0 781 to 85061.964.835.4 661 to 78069.968.436.2 601 to 66074.068.436.7 501 to 60073.566.336.7 300 to 50071.863.1Not available
See more : Es In Finance
Source: Experian State of the Automotive Finance Market, Q4 2023.
But auto loans for new vehicles are stretching even longer — topping six years — for nonprime borrowers. Middle-tier credit borrowers take out the longest new car loans, at an average of 74.0 months. Top credit score borrowers have the shortest average new car loan term, at 61.9 months.
The average new car lease term is 36.0 months, or three years.
“That’s such a long time to be stuck paying for a depreciating asset,” LendingTree chief credit analyst Matt Schulz says. “It can have an enormous impact on a family’s finances. That money going toward a car payment isn’t earning interest and funding your emergency savings, your retirement nest egg, a mortgage down payment or your kid’s college fund. Yes, our vehicles are important. In much of the country, you can’t get around without one. And, yes, we love fancy new cars, even new-to-us cars. They’re fun to drive and show off. However, once that initial glow wears off and you’re still making a big monthly payment on that vehicle after five-plus years, it may not seem worth it.”
Auto loan delinquency rates continue to drop from peaks
According to data from the New York Fed, 90-day delinquency rates on auto loans peaked in the fourth quarter of 2010 at 5.3%, dropping to 4.2% as of the fourth quarter of 2023.
Meanwhile, the percentage of auto loans that fell to 30 days past due spiked to 10.9% back in the second quarter of 2009. However, it has stayed below 8.0% since 2011 and has decreased to 7.7% in the fourth quarter of 2023.
Buyers turn to captive lenders and banks the most for auto financing
As of the fourth quarter of 2023, captive lenders (manufacturers’ financing arms) hold the highest market share, at 31.6%. Banks follow at 24.0%, with credit unions at 22.1%.
“Buy-here, pay-here” businesses, often known for predatory lending practices, capture up to 15.5% of the used car financing market. In the used car arena, captive lenders only claim 9.6%.
Schulz warns that buy-here, pay-here loans are dangerous. Not only can the sticker price be bigger, but the interest rates can look more like credit card rates than typical auto loan rates, and there may be extra fees. There may be an unusual payment schedule requiring you to pay more often than the typical monthly payment. Some places might even require you to put a tracking device on the car to make it easier to take back if you fall behind on payments.
In short, these should be among the last options you’d consider — but your credit score plays a role in what options are available to you.
“Good credit means more good options, and that’s a big deal,” Schulz says. “You must shop around. If you finance through the car seller, you’re very likely to overpay. Use sites like LendingTree to compare auto loan offers easily. You could also visit multiple lenders online on your own — consider looking at credit unions if you do. Once you’ve found a deal you’re happy with, get preapproved by the lender. That preapproval gives you leverage over the car seller because they know you won’t be happy with a bad financing offer.”
Sources
- Experian
- U.S. Bureau of Labor Statistics
- Federal Reserve Bank of New York
Source: https://tholansonnha.com
Category: Finance
