A new study reveals that the a big part of the automotive growth is based on consumers that pay more than before and also seek loans that reach record durations.
US data tracking firm Experian Automotive has revealed its latest installment in the State of the Automotive Finance Market, which shows monthly payments reach record levels, while buyers also increasingly turn to leases now to help them offset the purchase of a new car.
“Consumers are really relying on financing as the price of new vehicles continues to move higher,” said Melinda Zabritski, Experian’s senior director of automotive credit. “Consumers clearly are stretching the loan term to help lower monthly payments, keeping them at a manageable level. The flip side of that is consumers can pay more in interest or being upside-down on their loan if they seek to trade their vehicle in early,” noted Zabritski. “It is definitely a choice that consumers will want to weigh carefully before making a final purchasing decision.”
While sales have now fully rebounded from the slump in demand caused by the recession, the Average Transaction Price shows that new car prices are going up – reaching record levels lately.
The Experian study shows the usual loan was of around $27,612, which is a new record, jumping $964 from last year’s study. The average monthly payment also reached a new record, climbing $15 from the first quarter of 2013 to $474 per month. Consequently, the average new vehicle loan is now stretched to a record period of five-and-a-half years, while 24.9% of buyers opted for 73 to 84 months contracts.