Americans have $ 1.42 trillion in auto credit debt, industry on track, report says
It’s no secret that the price of Consumer Reports Last Wednesday, the auto credit industry looks more like the Wild West than you might think.and cars have grown exponentially over the past decade, especially over the past year and a half. As vehicles get more expensive, there’s a perfect storm: Buyers need to borrow money, and lenders are willing to charge that money. According to a report by
Here’s how it boils down. Lenders don’t really have strict rules in place when it comes to assigning rates to customers, regardless of their credit rating. CR reviewed nearly 858,000 auto loans from 17 lenders over one year. He found that subprime, prime, or super-prime borrowers all have a high chance of falling for an expensive car loan. In each credit score range, borrowers received APR loan rates ranging from 0% to over 25%. CR found that about 3% of borrowers with prime credit scores still ended up with auto loans with an interest rate of 10% or more. Data showed that many of these customers weren’t sure they could negotiate loan terms with a lender before signing, or even seek a better rate.
Almost 25% of the CR loans examined included consumers spending more than 10% of their income on a car payment – considered by experts to be a no-no budget. As for subprime borrowers, 50% of these consumers have devoted 10% of their income to a car loan. This may be due in part to a lack of underwriting standards, CR said. It found that only 4% of the time, lenders verify a customer’s income and guarantee their ability to pay off a car loan. Only 4%.
Last year, Americans held auto loans worth $ 1.37 trillion. CR estimates the debt will hit $ 1.42 trillion this year. The average new car payment associated with this data is $ 600 per month, up 25% from 10 years ago. And those numbers are unlikely to improve either, as a tight supply for new and used car inventories makes buyers more eager to get into anything with four wheels. All the while, dealers and lenders can continue to benefit from it.