US new auto loan amounts reach record high, Experian reports
Average new-vehicle loan size in the US climbed to $29,551 in late 2015, as longer terms and strong sales pushed borrowing to new heights.
The average amount borrowed for a new car in the United States reached a record $29,551 in the fourth quarter of 2015, according to Experian Automotive’s latest State of Automotive Financing report. This figure marks a four percent rise over the same period in 2014 and is the highest since Experian began tracking the data in 2008. Strong new-car sales, bolstered by low fuel prices, accessible credit and steady employment, have driven US consumers to take out larger loans and longer terms.
US New Auto Loans Reach Record Levels
| Type | Average Amount / Term |
|---|---|
| New-vehicle loan amount | $29,551 |
| Year-on-year increase | 4% |
| New-car loan term | 67 months |
| Used-car loan term | 63 months |
| Lease share of new car sales | 33.6% |
| Average monthly payment (new) | $493 |
| Average monthly payment (lease) | $412 |
Longer Terms and Higher Payments
The average loan term for new vehicles stretched to 67 months, up by one month compared to the previous year. Used-car loan terms also increased to 63 months. This extension in loan durations has helped buyers manage higher transaction prices by spreading payments over a longer period. The average monthly payment on a new vehicle reached $493, while lease payments averaged $412. Leasing continues to grow as an alternative for those seeking lower monthly outlays. Leases made up 33.6 percent of new car sales in the last quarter of 2015, rising from 29.9 percent a year earlier. The trend reflects consumers’ efforts to stay within budget as vehicle prices and loan amounts rise.
- Low fuel prices encouraged purchase of larger, more expensive vehicles.
- Credit availability enabled more buyers to finance new cars.
- Steady employment and a positive economic outlook supported consumer confidence.
- Leasing became more popular as buyers sought lower monthly payments.
Factors Behind Rising Loan Amounts
Several factors have contributed to the increase in average loan amounts and longer terms. Low fuel prices throughout 2015 and into 2016 made it more attractive for consumers to purchase larger vehicles, which often come with higher price tags. Credit availability also played a significant role, as lenders remained willing to offer financing to a wide range of buyers. Additionally, steady employment figures and a generally positive economic outlook encouraged more Americans to consider new vehicle purchases or leases.
What It Means for Buyers and Lenders
- Longer loan terms mean lower monthly payments but higher total interest paid.
- Leasing offers lower payments and frequent upgrades, but comes with restrictions.
- Lenders face increased risk as average financed amounts and loan terms rise.
- Negative equity risk grows if vehicle values fall faster than loans are repaid.
For buyers, longer loan terms and higher average loan amounts mean lower monthly payments but greater total interest paid over the life of the loan. Spreading payments over more months can make vehicles seem more affordable in the short term, but it increases the overall cost of borrowing. Buyers who choose leasing over traditional financing may benefit from lower monthly payments and the ability to drive newer vehicles more frequently, but they may also face mileage restrictions and other conditions. Lenders, meanwhile, face increased exposure as the average amount financed per vehicle rises. Higher loan balances and longer terms can increase the risk of negative equity, especially if vehicle values decline faster than the loan is repaid. The growth in leasing suggests many consumers are opting for flexibility and lower payments, even as overall debt levels climb. Lenders must balance the desire to support sales with the need to manage risk in their loan portfolios.
Outlook for the US Auto Market
The combination of strong sales, higher loan amounts and extended terms has helped sustain the US auto market’s momentum through early 2016. Whether this trend continues will depend on several factors, including interest rates, fuel prices and broader economic conditions. If interest rates rise or if economic growth slows, consumers may become more cautious about taking on larger debts or longer-term commitments. For now, the data reflects a robust period for US auto financing and sales. The automotive industry and financial institutions will continue to monitor these trends closely, as shifts in consumer borrowing and leasing behaviour can have significant implications for both markets and individual buyers. As economic conditions evolve, both buyers and lenders may need to adjust their strategies to navigate potential changes in the market.
