The market for passenger vehicles in the US has grown in both cost and volume over the past few years. Car loan statistics show that with the average car loan being much more accessible to adults of all generations, it seems that the second wave of motorization is on the move.
Today, anyone interested in taking out a car loan to purchase a new or used vehicle has to consider a range of elements beforehand. So, finding out more about the actual factors influencing the loan itself is never a bad idea.
That said, let’s get more info about the topic.
Essential Auto Loan Statistics (Editor’s Pick)
- In the third quarter of 2020, the average new car loan was $34,635
- The average used car loan was $20,438 in the third quarter of 2020
- In January 2022, the interest rate on a five-year new car loan in the US was 3.94%
- In Q1 of 2021, car payments for about 81.2% of new vehicles were made with financing
- Louisiana has the highest monthly payments for both new ($596) and used cars ($393)
- Auto loan debt accounted for approximately 10% of all household debt in 2019
- In 100 largest metros, 55.3% of Gen Xers are in auto loan debt
- Compared to loan payments, leasing a car incurs a $112 lower monthly payment
General Car Loan Data
1. Around 44% of people in the United States turn to loans before buying a car.
More than 40% of all adult residents in the country rely on loans to obtain a car, which was not always the case. However, due to lower financial independence and greater expenses, many individuals turn to such aid.
2. Subprime lenders require a monthly gross income of at least $1,500–$2,000.
(The Car Connection)
If you want to take a bad credit car loan, there are some requirements to meet. Those are having an acceptable debt to income (DTI) and payment to income (PTI) ratios and a minimum monthly income requirement.
If you meet the requirement of having $1,500–$2,000 per month, lenders will decide whether you have enough income to pay your auto loan comfortably by calculating your DTI and PTI rations.
3. Auto loan statistics note that in Q2 of 2020, banks accounted for 23.92% of new car financing.
However, captive financing still made up the largest share of new car financing, with 61.26%. Moreover, credit unions accounted for 10.21% and financing companies for 4.60% of new car financing.
4. Banks accounted for 34.83% of used car financing in Q2 of 2020.
Even though captive financing represented the largest share of new car financing, that wasn’t the case for used car financing. In fact, captive financing accounted for only 9.21% of used car financing.
Here, banks represented the largest share of financing. Another common form were credit unions (24.91%).
Average Car Loan and Interest Rate in the US by Year
5. In Q3 of 2020, the average new car loan was more than $34,500.
More precisely, the average loan amount for a new car was estimated at $34,635, with an average monthly payment of $563. In fact, the average new vehicle monthly payment increased by only $11 year over year.
6. In Q3 of 2020, the average used car loan was $20,438.
Compared to the same period of the year before, there was a significant $945 increase. But, how much is the average monthly car payment?
Monthly payment amounts also increased by $6, reaching $397. Although high, it was still more affordable than the average loan payment for new vehicles.
A quick reminder — in 2021, the US market for used vehicles was worth more than $153 billion.
7. The interest rate on a five-year new car loan in the US was 3.94% in January 2022.
Since September 2021, the interest rates of 60-month new car loans in the United States have stayed below 4%.
In the period between January 2021 and January 2022, the average car loan interest rate was the lowest in December 2021, when it was approximately 3.85%. Then again, it was the highest in January 2021, when it was somewhere around 4.19%.
8. Back in November 2019, the interest rate on a five-year new car loan in the United States was around 4.59%.
Even though it now seems high, it was the lowest average interest rate for a car loan in the entire 2019. That said, the highest interest rate on a 60-month new car loan in 2019 was recorded in February when it was somewhere around 4.78%.
The interest rates were decreasing between February and November, except for their slight peak in June.
It goes without saying that the lower the car loan interest rates are, the cheaper the loan is. Since trends show a decrease in the interest rates, many people turn to these loans.
9. Average new car loan interest rates were 3.64% in the third quarter of 2021.
Even though brand new cars are the most expensive option in terms of car value and loan amount, the interest rate is usually the lowest.
Contrary to this, used cars come at much lower market value and consequently face much steeper interest rates. As a matter of fact, in the third quarter of 2021, they were 5.35%.
Average New Car Payment vs. Used Car Payment
10. With a new car, you’ll lose at least 20% of its value in the first year, which isn’t the case when you buy a used vehicle.
In today’s market, it pays off to buy CPO or used cars rather than getting new ones. To elaborate, new cars tend to lose 10%–15% of their value when they’re out of the dealership and another 10%–15% during the first year.
Contrary to this, with both certified pre-owned (CPO) and used vehicles, the initial big value drop has already happened, as the car was used prior to you driving it.
Now, let’s find out what percentage of cars are paid off.
11. Car payments for about 81.2% of new vehicles were made with some kind of financing in Q1 of 2021.
According to Statista, over eight in ten of all new vehicles in the market are purchased with the help of some kind of financing — loan or lease.
In contrast, in the first quarter of 2021, 34.5% of used US cars were financed.
12. Louisiana is the state with the highest monthly payments for both new ($596) and used cars ($393).
Nevada and Georgia also rank near the top regarding the highest monthly new car payment, with an average car payment per month of $587 and $573, respectively.
On the other hand, New Hampshire and Oregon offer some of the lowest new car monthly payments. The state with the lowest used car monthly payment is Montana.
13. The average auto loan payment term for new cars is over six months longer than for used cars.
If you decide to purchase a new car in the US at this moment, your loan term will most likely be about six years (72 months). However, the average car loan payment term length will decrease slightly if you choose to buy a used car — up to 65.30 months on average.
Still, there are some factors to consider and adjust to reduce it — making a larger down payment is one of them.
All in all, there’s a notable rise in the popularity of car loans with a term length of more than 73 months, primarily coming at the expense of the 49– to 60–month loan popularity.
Automobile Loan Debt
14. In 2019, Americans had an auto loan debt of $1.29 trillion.
Americans’ total auto loan debt has dramatically risen in the last decade. Moreover, due to the skyrocketing new and used car prices, the debt will probably increase even more in the forthcoming years. So, all we have to do is wait to see what the future of cars holds.
15. In 2019, auto loan debt was approximately 10% of all household debt, based on car loan statistics.
Recently, people have been buying more durable and better-quality vehicles, so it’s no wonder that they cost more. Therefore, with the increase of these prices, people turn to loans more frequently, which may lead to a higher household auto debt, too.
16. Americans owed $1.37 trillion in total car loan amounts in 2020.
Between 2019 and the last quarter of 2020, the total US auto debt increased by $80 billion, translating to a 6% increase. That also indicated a 6% average auto debt growth rate over the past decade.
17. Bank of America auto loans present three key factors to consider in order to avoid car loan debt.
(Bank of America)
Bank of America provides all its potential clients for car loans with some free financial advice. More specifically, they point out the three key factors that affect the total cost of car loans:
- the loan amount
- the APR (annual percentage rate of interest)
- the length of the loan term.
A loan calculator is also provided to individuals to match and compare options in order to reach their most optimal one.
18. In 100 largest metros, Gen Xers are most likely (55.3%) to be in auto loan debt, as car buying statistics show.
The median loan balance for Gen Xers amounts to a total of $19,748. Moreover, the South is the home to the consumers with the highest auto loan debt balances.
In fact, only one place out of the top five metros where every generation has the highest median debt balance is outside the Southern states.
19. Baby Boomers have the second-highest average auto debt, as per car loan statistics.
Namely, people from this generation have an average auto loan balance of $18,759. Even though Baby Boomers have a higher average car loan debt than many other generations, their balances are still lower than the national average.
20. People from Gen Z hold an average auto loan debt of $15,574.
In comparison, their average auto loan debt in the second quarter of 2019 was $14,272. So, the latest trends are showing an increase, and it remains to be seen how things will play out for this generation.
Average Car Loan Payment vs. Lease
21. Leasing a car incurs a monthly payment that is $112 less than the average loan payment.
According to some estimates, people leasing cars instead of taking out loans to buy them will face lower monthly charges. The difference in payments averages around $100, although it is subject to changes based on the individual terms of your leasing contract. However, if you crash a leased car, it may cost you more.
22. In 2019, leasing topped buying a new car since the former offered a $487 monthly payment.
In comparison, the average monthly car payment in America for a new car was somewhere around $550.
Be that as it may, if you want to find a more affordable option than signing another lease on a new car, you can take a look at a certified pre-owned vehicle. That is because they often offer a 100,000-mile powertrain warranty, which can be very helpful for major repairs.
Let’s not forget that 27.2% of the global automotive repairs and maintenance is attributed to North America.
23. Auto lease average length amounts to 3–4 years, which is shorter than the average car loan length.
Compared to the average car loan length for new and used cars, which ranges between five and six years in length, leases are definitely the shorter way out.
The average length of up to 48 months has made it possible even for subprime-tier borrowers to get a car to their name.
24. Auto financing trends note that the car lease percentage of auto financing in Q1 of 2019 was 29.07%.
For the same period of the year before, car leases made up 29.83% of the total automotive financing market, meaning that the volume of leases stabilized at around 30% of the whole.
A stable dominance on the lease market was also noted for new car leases, while used car leases are present with just 4.7% of the total market.
With more and more people across the US being dependent on some kind of financing to make a car purchase, the amount of car loan debt has also risen.
All in all, the average American car payment offers can change depending on several factors. That is to say; each person will need to determine the best amount and terms for their personal financial competence.
That is why it is best to understand the entire loan origination process beforehand (to make the best possible decision) and only later take up the endeavor of obtaining the actual financing.
People Also Ask
Recently, the share of financed cars has been decreasing. In fact, that has been happening after the second quarter of 2020. Then, 85.5% of new vehicles were financed.
Before this rise, the quarter with the highest share of financed vehicles was the second quarter of 2019, when 87.6% of new cars were financed.
According to the latest data, which is from the first quarter of 2021, 81.24% of new vehicles were financed.
Because of the lower financial independence and larger expenses, many Americans take loans in order to get a car. We’ve already learned that over 80% of new vehicles are financed.
But now, let’s see how many Americans turn to financing or loans in order to obtain a vehicle. According to some estimates, that’s the case for around 44% of people in the US.
Let’s take a look at data from the third quarter of 2020. Regarding new cars, the average loan was approximately $34,635. Moreover, the average monthly payment amounted to $563, increasing by $11 from the same period of the year before.
As for used cars, the average loan was $20,438 in the third quarter of 2020. Furthermore, monthly payments totaled $397.
Because of the explosion in the prices of new and used cars recently, Americans’ debts have seen an increase, reaching over $1 trillion.
In 2019, for instance, the auto loan debt of people in the United States was $1.29 trillion, representing around 10% of all household debt. In addition, car loan statistics show that in 2020, Americans owed $1.37 trillion in auto loans.