Auto loans have hit a new record, and it’s not a good sign in an economy that’s so volatile. Consumers’ monthly auto payments have hit a new all-time high too. People buying new vehicles continue to push the envelope, borrowing more and, on average, paying more each month for their auto loan.
Credit-ratings firm Experian says the average amount borrowed to buy a new vehicle hit a record $32,187 in the first quarter, according to a report by CNBC. The average used-vehicle loan also hit a record high of $20,137. “We have not seen a slowdown in loan demand. In fact, volume for new and used loans is up from previous years,” said Melinda Zabritski, senior director of automotive financial solutions for Experian. As a result, the average monthly payment for a new vehicle continued to climb to a new high of $554 and to a record $391 for used vehicles, according to Experian.
This is also unnerving considering there are so many brand new cars going unsold. People are buying cars they cannot afford, and, according to Zabritski, many are now leasing their car instead of electing to own it.
What is a bit of an odd trend, is that people with the best credit scores are increasingly buying a used model instead of new. Experian says 61.8% of those with a prime credit rating and 44.7% of those with a super prime credit rating took out loans to buy a used vehicle in the first quarter. Those are the highest percentages Experian has ever recorded for prime and super-prime used vehicle borrowing.
“Consumers seem to be taking advantage of options to reduce payments,” Zabritski said. But that makes little sense considering monthly payments are sky high and continue to break previous records. It actually appears that consumers don’t seem to be bothered by a high monthly payment. In February, just a few months ago, auto loan delinquencies were at 19-year highs during an economy being touted as “excellent and growing” as job growth wanes and the tax on consumers (tariffs) puts more pressure on people. “That is more than a million more troubled borrowers than there had been at the end of 2010 when the overall delinquency rates were at their worst,” economists at the New York Fed wrote in a blog post.
Financial gurus such as Dave Ramsey tend to put car loans firmly into the “bad debt” category. And there’s a reason for that. Mathematically, they don’t make much sense, according to Ramsey’s blog.
According to a piece on his blog titled The Truth About Car Payments, a new car will lose 60% of its value within the first five years, according to Carfax. That means that after six years, you’ve paid almost $33,000 for a $26,000 car, which is now worth maybe $6,000. That’s not a good deal. Not to mention, if your car loses value faster than you can make your payments, you’re on the road to an upside-down car loan.
But the trend toward pricer cars and larger payments doesn’t appear to one that’s waning, regardless of what personal wealth experts may say.
Three years ago I purchased a new car. That will not happen again! A week ago I received an offer from my dealer to buy back the vehicle at 1000.00 above Blue Book value, add another 1000.00 incentive and put me in a brand new, identical car with all the 2019 bells and whistles. It would only add another 118.00 to a new 4 year no interest loan. That would raise my car payment to over 600.00 per month plus make sure that I continue to pay 95.00 per month in property tax to a county which is intent on turning itself from a farming community into NYC. Two things will happen …. no more new cars and I am looking to move!
You are a true believer. Blessings of the state, blessings of the masses. Thou art a subject of the divine. Created in the image of man, by the masses, for the masses.
Let us be thankful we have an occupation to fill. Work hard; increase production, prevent accidents, and be happy.
That is cause car companies are greedy thieves.
Back in the 90s you could buy a brand new car for a 279 for 60 months payment but they didn’t like that so now they call it a lease.
Best option is to buy a car put it on 3 credit cards pay for a year and then default….
Insurance and DMV fees are a big factor also. I’ve driven mostly older cars all my life and only carry liability insurance. Comp and collision are not worth it for older cars. My DMV costs are $80/year. If I had a new car I’d be paying $200/month or more just for Insurance and DMV, maybe a lot more, and a car payment on top.
I got out of college in ’68 and got a job. I wanted to get a Corvette, even a used one. When I asked my insurance guy what that would cost he said “I can look it up but you won’t like it. Get a Nova or something with a 350 and your insurance will be 70% cheaper.” I got a ’65 Chevy Biscayne, 350, and was very happy. It was big enough to sleep in if I had to.
Experian sure has a lot of information for just a credit reporting agency.
There’s so much to learn from this article if you don’t buy into the fear porn. Perhaps people are buying more new cars with higher payments is cause more people are working. And perhaps the consumers with prime and super prime credit scores are buying used cars is because they’re smart with their money. Hence the credit ratings they hold. Of course this thinking is too simple to embrace for some, including these lazy assed porn peddling authors. I’m not defending irresponsible financial behavior, Americans generally have always paid a lot for automobiles, have you seen sticker prices lately?, but this is no different now than it was 20, 30 years ago. People are working, earning a living, if they wanna spend a lot on a car, why is it anyone’s damn business?
Lesson: never go into heavy debt for a depreciating asset if you can possibly help it.
The Bilderburgers will meet in 2019
American Free Press
The last real newspaper
reports that the Bilderburgers have finally announced the date and location of their next meeting.
For $32,000 you can buy a car or you can buy a horse, a boat, a bicycle, and an an acre or two.
What’s the point in buying a $40-50k vehicle if you can’t afford to keep gas in the tank?
It’s common in my area to see people living in run down mobile homes(trailers) but have a $40-50k vehicle parked in their driveway.
They would rather have a nice vehicle and live in a mobile home that’s falling apart,than live in a decent home and drive an older model vehicle.
“Auto loans have hit a new record.”
Translation: Ignorance of Americans has hit a new record.
This old coot can’t imagine borrowing money for a vehicle. It starts with one’s first vehicle. Buy clunkers for cash and learn how to maintain them.
Buy new, pay cash, drive’m until the wheels fall off
Older car repair costs rising also. Oh well, who needs the hassle of attempting a cross country trip with all of the various roadblocks set up to thin your wallet and leave you on the side of the road repacking all of your belongings that are left.
Another ten years prices will double again, along with your wages… if you are intelligent enough to earn a great income.
Too much class envy on this site. Too much self pity for not having it all, too much finger pointing blaming everyone except the true culprit, the one in the mirror.
wages never keep pace with inflation. We drift further and further into a have and have not society. Not everybody can be the crème of the crop. I do understand the frustration as Americans are dumber than a box of rocks, but do you want to live in a citadel walled off and worried if you step out you will get jacked?
Use cash only to buy a vehicle and forget about all of that credit crap. My income is too low to qualify for credit so I can only do what my circumstances allow me to do.
I watch the realty signs being posted with clockwork precision, around the amount of time it takes to default and get repo’d.
Ghetto car loans are cycling, on some predictable metric, too, or I’m a monkey’s uncle. There’s got to be some QE, followed by a timely process for their insurance scam to pay off.
It means that a speculator can game the Trayvon system.