Americans continue to borrow record amounts for auto loans despite rising interest
Americans borrow more than ever for new and used cars. Interest rates are rising and rising. But this doesn’t stop them. According to the car Department of one of the country's largest credit bureaus, in the second quarter the delay rate increased by almost 60 days. USA TODAY [https://www.usatoday.com]
Based on the analysis of auto loans in the fourth quarter by Experian , it can be concluded that the average loan for a used auto rose to an unprecedented level of $19,589, while the average new loan for a new auto reached the highest level of $31,099.
" Nowerdays Americans don't look how much income they need to pay. Most often, this payment is much higher than their average income. I think we are in a period of time where the problem of accessibility is a question," said Melinda Zabritski, senior director of Experian's solutions of auto finance.
At the moment, consumers have a tendency to pay more for the cars and trucks they buy. Also it takes more time to pay for it. Most often, Americans extend new auto loans for 69 months (Experian’s information). The report also showed that the average service life of the auto is more than 64 months.
In the fourth quarter, the average monthly fee for a new auto reached its peak of almost $520. And the average amount of used auto loan exceeded $370 per month.
There are several explanations for this expenditure. Americans began to buy more trucks and SUVs, which are sold at higher prices. Another factor, especially last year, is the growth of interest rates.
At the moment, there is a pattern among consumers to extend their loans. The reason was the increase in prices for new autos by more than 10% over the past five years. In 2017, the average price paid for a new car exceeded $35,000. This price increased from us $33,532 in 2015 and us $31,773 in 2013.
$17,090! It was this amount that accounted for the debt on the average auto loan in the second quarter.
"For some buyers it will be a surprise. For buyers with an average credit rating, rates will be higher than a couple years ago. Which means a higher monthly payment." said Jessica Caldwell, executive director of Industry Analysis for Edmunds.com. [https://www.edmunds.com]
In February, the average interest rate for new auto financed was 5.2%. This is 0.3% higher compared to last year and 0.8% higher than 5 years ago.
"We're starting to see the effect of seeping in from the rate hike at the federal level," Caldwell said.
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Based on the information provided by the federal reserve, the debt on credit cards Americans crossed the line of 1 trillion dollars.