Auto loans, particularly subprime and the “trade-in treadmill,” will dominate the next recession. Motorists are borrowing record amounts of auto loans to drive from point A to point B, and it is only getting worse as auto loan debt hovers around the crucial $1 trillion threshold.
According to a new report from Experian, the average new car loan reached a record high of $31,099; for used cars, the average loan hit a record high of $19,589.
Today, borrowers pay a record monthly average for their new vehicle $515. For used automobiles, the average auto loan payment is about $371 per month, which is also an all-time high.
“I think we’re certainly at a point where affordability is a question,” said Melinda Zabritski, Experian’s senior director of automotive finance solutions. “When you look at how much income you need to support that payment, it certainly is higher than your average individual income.”
It is also costing more to finance new vehicles. Last month, the average interest rate was 5.2 percent, up from 4.9 percent the same time a year ago.
Even with rising interest rates, Americans are going full speed ahead in the auto loan market.
Debt will play an important part in the next financial crisis. Credit card debt totals more than $1 trillion, student loan debt is more than $1 trillion, mortgage loan debt is in the trillions, and now auto loan debt is about $1 trillion.
Also see: Americans Are Living Large, But the Bubble May Soon Burst
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