With supply-chain issues the pandemic driving vehicle prices to record levels, car buyers are taking out big loans in order to afford the vehicles they need and live everyday.
Since 2003, the nationwide total average auto loan balance has increased from $ 2,960 to $ 5,210 — an increase of around 76%. Some customers have found this difficult to manage: In the fourth quarter of 2021, 4% of all auto debt balances have been in the country for over 90 days.
New York’s “State Level Household Debt Statistics 2003-2021” report from Sound Dollar Compiled Statistics shows that states have the highest auto debt balances. The report was released in February 2022 and contains data from 2021. Data in the Report is from the New York Fed Consumer Credit Panel and Equifax. If more than one state had the same balance, they tied for the same rank.
Today’s situation has helped create a perfect storm. For new cars, the initial lockdowns of 2020 halted production for nearly three months, which is the cut-off of lots of new cars hitting sales. In 2021, a microchip shortage made the situation worse as manufacturers could get the parts they needed to build new cars. The supply of cars tanked just as consumers started spending again, causing prices to go up with increased demand.
When customers get their hands on new cars, they turn to the used car market. Supply could keep up with demand, so prices skyrocketed, jumping 42% from the pandemic to an average of $ 28,205.
While car buyers are taking out larger loans to fund their purchases, they are also stretching their payments longer. The most common auto loan term is 60 months, but now borrowers are seeking out 72-month and even 84-month loan terms. These contributors have higher auto loan balances, lower the cost of borrowing for more customers’ interest, and it leaves them with less money to spend.