According to Experian, a consumer credit reporting agency, the first part of 2018 is marked by a record sum for the average monthly loan payment for a new vehicle. This increase, that has reached the sum of $523, is a result of the rise in interest rates.
Besides the new standard for the average monthly loan payment for a new vehicle, the record for the average amount borrowed by buyers of new cars has also been broken, reaching the sum of $31,453.
What has changed?
Going a few years back, history tells us of a time when the monthly payment for new truck and car buyers was roughly under $500. But, given the analysis made by Experian which shows that the average interest rate has grown up 31 basis points compared to last year, being of 5.17 percent in the first quarter of 2018, we can say that times change, and fast.
Because of the increase in interest rates, the average monthly loan payment for a brand new vehicle has hit the sum of $523, compared to $508 the last year. This means an increase of $15.
The first three months of this year have also been put under the microscope of Experian, more precisely regarding the amounts borrowed for new cars, trucks and SUV’s, an analysis that has shown yet another record being broken, the sum converging to up to $31,453.
How does the aftermath look?
In the first part of the year, the average length of an auto loan was just over five years and nine months, according to Experian. With more expensive vehicles being produced and bought and because of the increase in interest rates, more and more car buyers decide to extend the time it will take for them to repay their debt.
More interesting, the number of loans of those not making their monthly payments has decreased, therefore the consumers are willing to borrow more. Once again, according to our trustworthy Experian, the percentage of those failing to make a monthly payment has decreased to 1.86 percent. And this percentage includes all loans.
What should you know?
Naturally, when it comes to loans, the greatest percentage is for those with the best credit scores, while the lenders are not so fond of those with subprime or deep subprime credit scores. The last two categories, subprime and deep subprime, have a vehicle loans percentage that has reportedly decreased with 8.4 percent for subprime and 14.1 percent deep subprime.
If you think of buying a new vehicle, or just curious about the situation you’ll be in if you buy one, there’s always the auto payment calculator. It functions as an auto loan payment and payoff calculator with trade-in, giving you a full break down of the costs resulted after buying a new vehicle. Different fees, taxes and payments are included in the calculator and therefore you will be sure of the true cost of your loan.
The first quarter of this year is also represented by the number of new vehicle sales, which has topped 17 million vehicles, a very strong number for the annual auto sales. So we could expect the interest rates to grow, and the standard monthly payment to increase again.Wake up Right! Subscribe to our Morning Briefing and get the news delivered to your inbox before breakfast!