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Total Auto Debt Climbs to $1.51 Trillion
According to Experian data, drivers owed $1.51 trillion on cars, motorcycles, and other personal vehicles as of the third quarter (Q3) of 2023. This marks an increase of $108 billion over 2022. The rise in auto debt is due to several factors, including increased costs for new vehicles, higher rates for both new and used car loans, and longer auto loan terms. The average auto loan term for a new vehicle now exceeds 68 months.
Average Auto Loan Balance Grows 5.2%
The average outstanding auto loan balance in the United States increased by 5.2% to $23,792 from Q3 2022 to Q3 2023. This growth is less than the 7.7% increase from 2021 to 2022 but still outpaces overall inflation, which was around 3% annually in late 2023. Higher borrowing rates have contributed to this increase, making monthly loan payments more expensive.
Rate of Auto Delinquencies Rises in 2023
Auto delinquency rates have increased in 2023. The percentage of borrowers 30 to 59 days late on their auto payments rose to 2.33% as of September 2023, a 0.15 percentage point increase from 2022. Delinquency rates for accounts 60-89 days and 90-180 days past due also saw increases.
Auto Loan Balances Rise Across All Credit Score Ranges
In 2023, average auto loan balances increased for all borrowers, regardless of their credit scores. Those with poor credit scores experienced the largest average balance increase of 8.8%. Subprime financing costs, which already have higher APRs, increased even more in 2023.
Auto Balance Increases Moderate Among the 50 States
Auto balances increased in every state and Washington, D.C., in 2023, although the increases were not as severe as in 2022. California, New York, and New Jersey led the nation with average balance increases of 7% or higher. Texas had the highest average auto balance in 2023 at $29,164.
Generation X Still Carries the Highest Auto Loan Balances
Generation X continues to carry the highest auto loan balances among all generations, with an average balance of over $27,000. This is nearly $3,000 more than the average balance of millennials, the generation with the next-largest auto loan balance.
What’s in Store for Auto Lending in 2024
Interest rates are expected to moderate in 2024. The Federal Reserve has indicated that it may stop raising its key interest rate and could even begin lowering rates. This could lead to lower average monthly payments for vehicle shoppers. Additionally, increased supply and lower base rates may bring back 0% APR financing for some new vehicles.
For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to assist you with the best mortgage solutions tailored to your needs.
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