Auto loan balances hit $ 1.36 trillion in 2020


According to the Federal Reserve Bank of New York’s latest quarterly household debt and credit report, Americans now carry $ 1.36 trillion in auto debt, enough to buy 59 million Toyota Camry’s for $ 23,000 the room.The current level of auto loan debt is almost double what it was just 10 years ago, and the figure has increased almost every quarter since 2010. In the third quarter of 2020, the TransUnion credit bureau has estimated that the average auto borrower had an outstanding balance of $ 19,646.

Key points to remember

  • Auto loan debt held by Americans hit a record high of $ 1.36 trillion in 2020.
  • Auto loans now account for nearly 10% of all household debt, the third largest debt category behind mortgages and student loans.
  • Although total auto loan debt continues to increase, the percentage of delinquent borrowers remains at a relatively low level.

Auto loan debt increases with total household debt

Our research has shown that auto loan debt currently accounts for 9% of outstanding household debt. Its growth was accompanied by an increase in total household debt, which stood at $ 14.3 trillion in November 2020, up $ 87 billion from the same period a year earlier. Auto loan debt is the third largest category of U.S. household debt after mortgage debt ($ 9.86 trillion) and student loan debt ($ 1.55 trillion), both of which have also grown steadily since 2011. .

Not only has the total auto loan balance increased, but the dollar value of the loan arrangements, or new loans, has also increased. The New York Fed described it as “a record … with $ 168 billion in newly created auto loans … which include both loans and leases.”

TransUnion, however, said the number of originations was down 11.9% year-over-year, with 6.5 million new loans opened in the second quarter of 2020, compared to 7.3 million in the same quarter. of 2019. TransUnion noted that the decline was “particularly noticeable. among subprime consumers ”, whose assemblies fell by 28.1%.

Cheap credit has undoubtedly helped more Americans buy cars over the past year. But if interest rates rise, consumers with variable rate credit card debt or variable rate mortgages will see their payments increase, which could make it more difficult for them to keep track of their car loan payments or take out loans. new auto loans.

For now, however, it seems there is room to be cautious with optimism. “Debt product balances and default rates were broadly stable in the third quarter,” Donghoon Lee, New York Fed researcher, noted in a press release accompanying the new report. “The data likely reflects improvements in economic activity and the labor market, as well as the positive impacts of temporary relief measures provided by the provisions of the CARES Act or offered voluntarily by lenders.”

The profiles of auto loan borrowers are beautiful

Despite the record amount of auto loan debt, Americans as a group have managed to keep pace with their car payments. Less than 6% of borrowers were 30 days or more past due as of Q3 2020, and just over 2% were 90 days or more past due.After 90 to 120 days of default, lenders consider borrowers to be in default and can repossess their vehicles, although some lenders have been more lenient during the coronavirus pandemic.

The median credit score for auto loan borrowers was 712, little change from the previous year, when it was 711.This is considered a “good” but not a “very good” or “excellent” credit score.

The bottom line

Americans’ auto debt continues to rise. A rise in interest rates at some point in the future could cause car buyers to spend less, but for now, consumers’ borrowing and buying patterns indicate continued optimism about the future. economy.


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