Car Loan Debt

If you are an American struggling with car loan debt, you are not alone. A vehicle is a crucial tool for most Americans, but millions pay a steep price for being able to have access to the luxury of mobility.

Statistics on Auto Loan Debt

car loan debt

  • As of late 2018, Americans owed more than $1.15 trillion in auto loan debt, roughly 25% more than what was owed by the end of 2013. This is also the highest sum in the 19 years that information on this type of debt has been gathered.
  • By the end of 2018, there was $144 billion in new debt from auto loans, continuing a nine-year trend of growing levels of car debt.
  • There were close to 110 million open auto loan accounts by the end of 2017.
  • 44% of Americans are now relying on a car loan to make a purchase, with the proportion of motorists buying brand-new vehicles on the rise.
  • In 2017, the average paid for a brand-new automobile was $31,099, balancing a $515 regular monthly payment, while the average used car cost around $21,375, with monthly payments nearing $398. These costs are over $5,000 higher than what they were a decade earlier & up 5% year-over-year.
  • Roughly 6.5% of all vehicle financing car loans are 90-plus days unpaid. Nearly 7 million Americans are 90 or more days behind in paying down their auto loan debt.

It’s a telling sign that Americans are struggling to pay their car bills in spite of other key signals of a growing economic situation, such as a low unemployment rate. When vehicle loan delinquencies increase, it is an excellent indication of financial distress in the U.S. economy.

How Credit Score Affects Car Loan Debt Rates & Terms

Car Loan Debt Rates

Just like any other scenario where consumers are likely to borrow capital to make a purchase, your credit score is a huge factor for your eligibility on an auto loan with lower interest. Borrowers with a sub-prime credit score are carrying a 14.5% to 20% interest rate on their vehicle loans whereas borrowers with excellent credit can bargain for much better deals with 4.5% to 6% interest rates.

The average term for a car loan for a brand-new vehicle is close to 6 years, with loans for previously owned vehicles right behind at 64.4-month terms. For leases on new vehicles, terms were closer to 3 years in length. Middle-tier credit debtors get the lengthiest auto loan terms on new cars with the average being over 73 months in length. Top-credit rating customers have the lowest, with an average term of only 62 months.

Despite the highest amount of debt from car loans being recorded in 2018, most of the increase has been driven by creditworthy borrowers. However, according to the New York Fed, overall efficiency or “quality” of auto loans is weakening as subprime debtors & younger consumers cannot afford to pay their car loan debt.

Market Share of Auto Loan Debts

Banks have the highest market share for auto loans with 31% coming from them, but private financial institutions are just behind with 30% of the market share. When it comes to loans for new cars, dealer financing is the clear winner as they tend to fund over 54% of those deals. For used vehicles, dealer financing only occupies around 10% of the market share.

Auto Loan Debt Relief

Auto Loan Debt Relief

While debt of some sort seems like an inevitable reality of life (mortgages, student loans, credit card debt), many consumers have trouble keeping up with the payments. If you’re battling to make auto loan settlements, there are several steps you can take to help get you back to financial safety.

The first thing to do is to analyze your current economic scenario and create a roadmap for escaping the debt. If you visit a financial advisor, he or she can collaborate with you & your loan provider to set up a budget-friendly repayment plan.

If you feel that you may fall behind on payments for the auto loan, it may be a good idea to inform your lender. They may not be thrilled to hear the news, but there is a better chance that they’ll be willing to cooperate with you on a repayment plan if you reach out to them, rather than a collections agency knocking on your door.

Being in debt or behind in a settlement payment can place a lot of stress over you, but remember to keep a degree head and not take a fast solution that will only prolong your anguish. As a last resort, selling the vehicle should be an option considered to relieve the auto debt. Try to avoid selling the vehicle for too little out of desperation. For example, a dealer lending program will often let you sell your vehicle for less than the sum of debt still owed, allowing you to roll the difference into funding for another car. This is essentially the equivalent to paying off credit card debt by taking out an additional credit card, which almost always results in a large mound of debt being accrued.

Conclusions on Car Loan Debt

on Car Loan Debt

A surge in auto-loan defaults is not likely to maim the whole economic system as home mortgages did in the run-up to the economic crisis of 2008 & 2009. The total debt from auto loans is just breaking $1 trillion, contrasting the $12 trillion in total debt from mortgage loans. Average credit scores struck a brand-new low by early 2019, driven greatly by a reduction in the demand to refinance. However, the average credit score for vehicle loans increased with less-worthy borrowing declining to less than 22% of all car loans.

In spite of the issues in the auto-loan section, Americans were generally hesitant to grow their overall levels of debt as of late 2018. However, if you are one of many Americans who have grown their debt in 2019, check out our debt settlement companies reviews for an idea of who can help you get your financial situation back under control.

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