New car buyers borrowed more money, and for longer terms, through the first quarter of 2021. A new study of auto loans from Experian showed that the average credit score of new car buyers is going up. But so is the amount they’re financing.
Experian researchers say that increasing sales of trucks and SUVs are driving the trend.
“Consumers are increasingly purchasing SUVs, CUVs, and pickups,” says Melinda Zabritski, Experian’s senior director of automotive financial solutions. “It’s driving loan amounts up and payments up.”
The average amount borrowed by a new vehicle buyer rose to $35,392 in the first quarter — $1,559 higher than during the same period one year earlier.
New car prices have been rising all year. Prices for nearly every category of vehicle rose in April. Earnings have not kept pace. The length of time it takes an average earner to pay off the average car rose in April after months of decline.
There is little reason to expect new car prices to lower anytime soon. Manufacturers have begun adapting their inventory practices to keep them high.
More than 35% of loans had a term of 72 months or longer. That figure is 3% higher than in 2020.
Though consumers are taking on more debt, there is good news in the data. The share of delinquent loans (where borrows fell more than 60 days behind on payments) fell to 0.54%. It stood at 0.67% in the first quarter of 2020 and 0.68% in 2019, before the COVID-19 pandemic began.
