Monthly auto loan payments surge to record highs as borrowing hits biggest one-year jump, Experian says

Don’t look now, however the common month-to-month loan fee for a brand new automobile is approaching $600 in accordance to Experian, which analyzes hundreds of thousands of recent and used car 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,” stated Melinda Zabritski, senior director for Experian’s automotive monetary options workforce.

Experian’s newest auto financing report covers the fourth quarter of final 12 months when new car gross sales improved, however had been nonetheless effectively beneath the tempo of gross sales in 2019.

Nonetheless, these taking out loans to purchase a brand new car borrowed a median of $35,228, a rise of just about $2,000 from a 12 months earlier. As a consequence, 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 median of $24,467, up virtually $1,700 12 months over 12 months.

Experian says month-to-month payments for used auto loans jumped $18, to $413 — the primary time the common topped $400.

“I can certainly remember when that ($400) was the average payment for a new car,” stated 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 larger as a result of the value for all automobiles is rising at a tempo few might have predicted a number of years in the past.

What’s behind the upper sticker costs?

For new automobiles, the demand for bigger and dearer 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 methods that assist stop accidents.

Used automobile and truck costs are climbing due to larger demand in the course of the Covid-19 pandemic. That additional tightened the already-strong used automobile market, the place roughly 40 million automobiles had been offered final 12 months 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,” stated Zabritski. “So consumers have done a good job of staying current and keeping those payments going.”