Auto loan debt reaches $1.52 trillion Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by providing you with interactive tools and financial calculators, publishing original and objective content. This allows you to conduct research and compare data for free to help you make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site come from companies who pay us. This compensation could affect how and where products appear on this site, including for instance, the order in which they may appear within the listing categories, except where prohibited by law for our loan products, such as mortgages and home equity, and other home lending products. This compensation, however, does not influence the information we provide, or the reviews that you see on this site. We do not cover the vast array of companies or financial offerings that could be available to you. Jackal Pan/Getty Images
3 min read Published December 19, 2022
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ins and outs of securely borrowing money to buy cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to take control of their finances with concise, well-researched and well-written information that breaks down complex topics into manageable bites. The Bankrate guarantee
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If you have questions about money. Bankrate has the answers. Our experts have been helping you manage your money for more than four decades. We are constantly striving to give our customers the right guidance and the tools necessary to make it through life’s financial journey. Bankrate adheres to a strict code of conduct , so you can trust that our content is truthful and reliable. Our award-winning editors and reporters create honest and accurate information to assist you in making the right financial decisions. The content created by our editorial team is factual, objective and uninfluenced by our advertisers. We’re transparent about how we are capable of bringing high-quality content, competitive rates and useful tools for you , by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products and services or when you click on certain links posted on our website. This compensation could impact how, where and in what order items are listed, except where prohibited by law. This is the case for our mortgage, home equity and other home lending products. Other factors, like our own website rules and whether or not a product is offered in your region or within your own personal credit score can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Third quarter 2022 saw an ongoing investigation about the “new normal” following the pandemic, anxiety about the threat of a new outbreak, and the increase in debt for households. Particularly, the auto loan debt hit $1.52 billion. This is more than 9 percent of all household debt. On top of that, up to levels close to pre-pandemic, as per the third quarter report, with 60-day delinquencies for new vehicle loans being 0.48 percent, and used automobile loans in the range of 1.17 percent. An unfortunate mix of factors have led to this rise in automobile loan debt. One of them is supply chain issues leaving record-high vehicle prices. Second are across the board for borrowers. This is particularly relevant for those the highest risk of being in debt or failing to make payments. Debt and delinquency statistics Overall loan balances grew 7.6 percent in the 3rd quarter in 2022. The across the country average is $5210. Since 2022’s beginning it has increased by 1.77 percentage points for a 60-month brand new car loan as well as 1.78 percentage points for a used 48-month car loan. A loan that is 30 days past due increased up to 2.19 percent in the third quarter of 2022 compared the 1.66 percent in 2021. The percentage of loans that are 60 days delinquent have increased to 0.81 percentage in 2022’s third quarter as compared to 0.55 per cent in 2021. Men have 16.3 percent more than women. The total amount of car loan and lease total was 1.43 trillion in 2021 as compared with 1.6 trillion for student loans.
A scarcity of vehicles has driven prices up. One cause of the increase in the amount of auto loan debt in recent years is the lack of cars available, explains Bankrate’s chief financial analyst Greg McBride, CFA. “The lack of new cars resulted in a shortage, which pushed prices higher, and this led to the sale of used cars when more car buyers shifted towards this the direction of buying,” McBride says. As this trend has been building, “there was an explosion in prices paid and loan balances that were financed after the pandemic struck.” McBride furthers this point by explaining that there’s no more awe-inspiring place to see households living paycheck-to-paycheck than in the driveway. Drivers have been met with pricey vehicles due to problems with supply chains, which is causing high-cost payments that are a burden on the budget. How the economy affects debt The state of the economy directly impacts drivers’ ability to purchase, finance and repay new or used cars in terms of cost and interest rates available. And with 43 percent of economists saying that recession will continue to expand in the next 12 to 18 months, is just one cost that will be more. Even if drivers are able borrow money to purchase a car in the first place however, the high interest rates make debt and delinquency a possible truth for many customers. Simplyput, as the country grapples with steep inflation rates The government has been working to stop the problem by increasing rates of benchmarking. The benchmark rate, increased to 4.25-4.5 percent for December. This rate reveals how much banks can charge to lend money to other banks. This will affect the interest rates of consumer goods, such as car loans. While relief did come in the form of vehicle prices decreasing, high rates can increase the amount of individuals falling behind on repayments and slipping into debt. There is a challenging dichotomy between less expensive vehicles . But as optimistically shared in , serious automobile loan delinquency rates are predicted to decrease modestly to 1.9 percent in 2023 from 1.95 percent in 2022. On average drivers paid the equivalent of $750 monthly to purchase a brand-new car as well as $525 monthly in the 3rd quarter in 2022. The index of consumer prices was at 298.1 at the mid-December timeframe, which is up from 278.9 one year ago. The average loan term for subprime lenders who finance new cars was 74.25 during the 3rd quarter in 2022. The average interest rate for brand new vehicles during the 3rd quarter in 2022 was 5.16 percent and 9.34 percent for used. There’s the risk of 65 percent of a recession before the middle of 2024, according to a .
How to escape debt Although debt may appear impossible, there’s still concrete you can take to get out of the hole that missed or late payments have caused. Americans have an average debt of $96,371 in 2021 -If you’ve experienced a debt crisis there’s no reason to feel alone. Use these suggestions to help you get out of the burden of debt. Consider debt consolidation The credit consolidation loan is a form of your debt. It can help you reduce the cost of interest and help you pay back debt at a faster rate. To find the ideal debt consolidation loan there are a few options. Like with every loan you should apply for preapproval before you can lock in the most favorable rate. Review your budget if you’re owing more than what’s on the bank account it might be the perfect time to . To adjust the amount you spend begin by taking an inventory of how much you’re spending and the things you’re spending it on. Look for common-cost items that you can remove or cut down. Any extra money that is piled up can be used to pay off your credit card. You can request a loan modification If you are in danger of being late on your auto loan It is a means to modify your current loan to suit your financial needs. In contrast to the previous method, this one is done with the existing lender and will directly change your loan conditions. Remember that not every lender will agree to alter the terms of a loan and you may need to provide proof of your hardship.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ways and pitfalls of borrowing money to buy an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to control their finances through providing precise, well-studied information that breaks down otherwise complicated subjects into bite-sized pieces.
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