- The average monthly loan payment for a new car is approaching $600 according to Experian, which analyzes millions of new and used vehicle loans.
- Those taking out loans to buy a new vehicle borrowed an average of $35,228, an increase of almost $2,000 from a year earlier.
- Loans for used vehicles also hit all-time highs, with consumers borrowing an average of $24,467, up almost $1,700 year over year.
Don't look now, but the average monthly loan payment for a new car is approaching $600 according to Experian, which analyzes millions of new and used vehicle loans.
"We went up higher amounts year over year in 2020 than we ever really have before and hit record highs in loan amounts and record highs in payments," said Melinda Zabritski, senior director for Experian's automotive financial solutions team.
Experian's latest auto financing report covers the fourth quarter of last year when new vehicle sales improved, but were still well below the pace of sales in 2019.
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Nonetheless, those taking out loans to buy a new vehicle borrowed an average of $35,228, an increase of almost $2,000 from a year earlier. As a result, monthly loan payments jumped $13 to a record high of $576 according to Experian. Loans for used vehicles also hit all-time highs, with consumers borrowing an average of $24,467, up almost $1,700 year over year.
Experian says monthly payments for used auto loans jumped $18, to $413 — the first time the average topped $400.
"I can certainly remember when that ($400) was the average payment for a new car," said Zabritski. "Those days are gone. We're certainly over $400 and don't expect to see that come down."
Auto loans and payments are getting bigger because the price for all vehicles is rising at a pace few could have predicted a few years ago.
What's behind the higher sticker prices?
For new vehicles, the demand for larger and more expensive SUVs and pickups means buyers are willing to pay more. Buyers also are increasingly opting for models with more tech features from infotainment to driver-assist systems that help prevent accidents.
Used car and truck prices are climbing due to greater demand during the Covid-19 pandemic. That further tightened the already-strong used car market, where approximately 40 million vehicles were sold last year according to Zabritski.
Despite the increased borrowing and higher payments, the number of consumers defaulting or falling behind on their auto loans remains below the historical average.
"Most of the lenders I'm talking with and have had discussions with since the middle of last year have all said that they're not seeing the delinquencies that they expected to see," said Zabritski. "So consumers have done a good job of staying current and keeping those payments going."