Average New Vehicle Auto Payment Hits Record High $523 Per Month

The average size of a loan for a new car in the U.S. set a record in the first quarter as did the average payment.

Database firm Experian notes U.S. Monthly Auto Payments Reach Record High in First Quarter.

  • New vehicle loans averaged $31,455
  • The average monthly payment for a new vehicle hit at record $523/month
  • Consumers are lengthening loan terms, with six years being the most common, to adjust to the higher costs and rising interest rates.
  • Outstanding loan balances reached a record high of $1.108 trillion
  • Loans for used vehicles reached $19,536, also a record

Auto Math

$523 * 12 * 6 = $37,656

That total does not factor in the down payment.

Interest = $37,656 - $31,455 = $6,201.

That's $1033.50 in interest annually.

Lovely.

At the end of six years, perhaps the car will fetch $5,000 in a trade-in, but everything depends on miles, damage, and of course advancements in self-driving.

Anyone trading the car in after three or four years will be hugely underwater.

The dream of owning a new vehicle is becoming more elusive,” said Melinda Zabritski, senior director of automotive financial solutions at Experian.

Elusive Dream?

Ah, the dream of spending $30,000 to $50,000 on a depreciating asset.

Elusive has not yet arrived, but it will.

Mike "Mish" Shedlock

Comments (19)
No. 1-19
2banana
2banana

Four words - sub prime auto loans

Bam_Man
Bam_Man

And I would imagine that the average New Vehicle Monthly Insurance Payment has also hit a record high.

QTPie
QTPie

This is not really all that surprising given that cars are getting more expensive and Americans are buying larger vehicles (trucks/SUVs tend to be more expensive than cars). One should note what’s happening with average loan lengths... they keep rising too and are now past 69 months. Gone are the days of the 36-month car loan.

BTW, the amounts above imply an average interest rate of around 6.2% across loans of all vintages. That’s pretty crazy too. My credit union currently charges about 2.9% for a 72 month loan and a couple of years ago it was around 2.2%. If we calculate a blended rate for multiple vintages of say 2.5% for decent credit, that means that the consumer vehicle loan to the AVERAGE buyer is 2.5 times more expensive (interest-wise) than what a credit union would charge someone with decent credit. Remember, this is comparing to the average buyer, no to a sub-prime buyer. This means auto loan companies are making absolutely insane profits.

caradoc-again
caradoc-again

Who benefits? The manufacturers, temporarily, and the Governments where the plants reside. Meanwhile, US consumers go in over their heads. Think on.

Tengen
Tengen

Been reading 84 month loans are becoming increasingly common too, especially for trucks. Can we be far off from 96 month loans?

I don't even remember the exact terms of my last loan in 2015, but I hated them so I made $2500/mo payments to dig out fast. Somehow I think that's not an option for many of these buyers.

QTPie
QTPie

Not really. Auto loans to subprime borrowers only make up about a quarter of all auto loans, and this percentage has been steadily declining.

BrianG
BrianG

Once again, the freedom to borrow at ever more favorable terms (for the consumer) is leading to unrelenting inflation (in terms of prices of cars.) Hmmm, funny how much this sounds JUST LIKE housing!

caradoc-again
caradoc-again

Rates are directly proportional to borrower discipline.

flubber
flubber

Those decked out, heavy-duty pick-up trucks are outrageously expensive but I guess they are moving them at the dealerships. I was stunned walking into a dealership when shopping for car for my wife and they had a white erase board listing interest rates applicable based upon your FICO score. Heaven help you if you have a low rating.

Onni4me
Onni4me

"Anyone trading the car in after three or four years will be hugely underwater." LOL Here where I live, people drive the oldest cars in Europe except maybe some place like Albania or Romania and we are supposed to be a "developed" first world country. The reason is that taxes are sky high and only people that can afford to buy new cars are those living comfortably on a cosy government position or having a business where you can deduct the price from earnings. The rest of us have to be happy what we can afford. An import car might be hit as much as import tax as one originally payed. The fact that we are in the EU - so called free trade union - does not stop our customs or tax office. Our country has received more than three court decisions from EU but the bureaucrats are delaying and dragging their feet. That said, the average car is 15 years old! Mine is from 2006 and I just hope don't need to change it for a newer model due to breakage or something. On top of that we have the annual car taxes depending ones carbon emissions. So, even if I wouldn't drive at all I need to pay something like 1000 euros for the insurance and annual car tax. I have 70% discount for the insurance since no accidents so far. My country is Finland. We are supposed to have high quality of living but due to the socialistic system we have, our purchasing power is very low indeed. I just counted as a business owner that if I earn 200 euros, I am lucky to receive 36 euros myself. Living the dream. Not.

Sechel
Sechel

With those terms, one is not buying a car but simply renting money

FlyOver_Country
FlyOver_Country

Spot on. I had cash to purchase a new vehicle but decided to take Toyota’s 0% for 48 months. I then turned around and invested the cash I was going to use to purchase the car. I figured if Toyota wants to give away free cash, I’m game.

ReadyKilowatt
ReadyKilowatt

People look at the fully loaded vehicles and think all the electronics and plush interiors are the cause. For sure that adds to the price, but let's not discount the multiple airbags, highly advanced engines that are required to meet uncle Sam's stringent requirements for fuel consumption and pull the incredibly heavy impact- and rollover-safe vehicles. Even something like air-conditioning is pretty much a requirement today because rolling down a window screws up the aerodynamics and will cause strange standing waves in the vehicle.

And because of fuel economy requirements driving aerodynamic design all vehicles are starting to look alike. So there's a one-upmanship in the interior to help differentiate one model from the other.

KidHorn
KidHorn

I always pay cash and go through the same routine. You can get 0% financing or $3k cash back. I take the cash back. The sales person doesn't know what to do since everyone takes the 0% financing. They have to consult with the sales manager.

millynical
millynical

5,000 after 6 years? sorry Mish but you haven't looked at car values lately. My 12 year old honda accord can still fetch 4k with 225k on the dash. Easy credit has inflated used car values to the point the average consumer looks at the price difference between a new and used car and thinks the depreciation curve will look the same in the next five years as it did the past five.

nic9075
nic9075

And mos people still only keep their cars for 3 years then trade in and roll any negative equity into new loan. You also have another $100 or so for car insurance and of course the $37 annual inspection that NY state and Massachusetts charge

texasdave
texasdave

And it's getting worse. People are not buying 4-door cars anymore, which are cheap, have good gas mileage, and drive well. Instead, they're piling into trucks and SUV's which are horrendously overpriced (70k for a pickup truck?), get poor gas mileage, and bob and weave all over the road.