Home > Auto Loans > A Record Number of Americans Turn to Auto Loans

Comments 0 Comments

A record number of consumers took out an auto loan or lease when car shopping in the second quarter of 2013. According to Experian Automotive’s analysis of second-quarter data, 84.5% of consumers used financing when getting a new car.

That’s the highest that share has been since Experian started tracking the statistic in 2006. Last year at this time, loans and leases made up 82.5% of the market, and in 2008, before the Great Recession, they accounted for 79.7%.

Increased Access to Financing

The data also showed a decline in interest rates for both new and used cars, which contributes to the high use of lenders, according to Melinda Zabritski, senior director of automotive credit for Experian Automotive. The average interest rate on a new car loan was 4.46% (down from 4.63% in second quarter 2012), and on used car loans it was 8.56% (down from 8.95%).

“Loans have become more accessible in recent years, and we’ve seen a steady growth in the percentage of consumers financing their vehicles,” Zabritski said in a news release about the data. “Obviously, this is good news for the auto industry, but it’s also good for consumers because this, combined with the reduction we have seen in delinquencies, shows that they are feeling more confident in their ability to take on more debt and pay it off in a timely manner.”

Not only was financing more common, the average loan balances were higher last quarter. The average new loan balance was up $812 year-over-year for an average of $26,526. Used loans also saw an average balance increase $480 to $17,913.

The balance increases, along with slightly longer loan terms, could explain the slight uptick in average monthly payments on new loans, which increased $5 year-over-year to $457. The average term of these loans increased by one month to 65 months. Monthly payments on used cars held steady at $351, though the loan term increased by a month, as well, to 61 months.

Leases generated a lower average monthly payment than those for new loans — $408 a month for 35 months. But leases usually go to consumers with higher credit scores, as shown by the average scores among leases and new loans: 760 vs. 749.

Car Loans and Credit History

Consumers’ credit scores impact their ability to qualify for loans and obtain decent interest rates. For instance, the average credit score for a used car loan was 660 last quarter, and the average interest rate was 8.56%. Compare that with the average 749 score and 4.46% for new car loans.

Before car shopping, consumers should check their credit reports and credit scores, not only to get an idea of financing options but also to make sure everything is accurate. And if their credit scores aren’t great, consumers can take steps to raise them, using the insights provided by a tool like Credit.com’s free Credit Report Card, which gives you a monthly update on your credit.

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team