Consumers turn to longer-term loans to help reduce costs of monthly payments. According to the latest State of the Automotive Finance Market report from Experian, which provides lenders with a quarterly analysis of the current trends and overall health of the automotive finance market, the average loan amount for a new vehicle reached a record high of $30,621 in Q4 2016. The average loan amount for a used vehicle also reached record levels, jumping from $18,850 in Q4 2015 to $19,329 in Q4 2016.
The report also showed the number of consumers opting for auto loans with terms of 73 to 84 months on their new vehicles increased from 29 percent in Q4 2015 to 32.1 percent in Q4 2016. In the used car market, there was an increase in 73- to 84-month loans from 16.4 percent in Q4 2015 to 18.2 percent in Q4 2016.
“With the average loan amount for new and used vehicles hitting all-time highs, we are seeing the need for affordability drive consumer purchasing behavior,” said Melinda Zabritski, Experian’s senior director of automotive finance. “Our latest research shows an $11,000 gap between the average loan amount on a new and used vehicle – the widest we have ever seen. This upward trend is causing many consumers to find alternative methods like extending loan terms, getting a short-term lease or opting for a used vehicle to get what they want while staying within their monthly budget.”
For consumers who still want to drive something new, leasing a new vehicle costs an average of $92 less per month compared with financing. The average monthly payment for a new leased vehicle is $414, versus $506 per month for a new vehicle purchase. The number of consumers who chose to lease a new vehicle increased slightly from 28.87 percent in Q4 2015 to 28.94 percent in Q4 2016.
Other key findings for Q4 2016:
- The average monthly payment for a new vehicle loan was $506, up from $493.
- The average new vehicle lease payment was $414, up from $412.
- The average monthly payment for a used vehicle loan was $364, up from $359.