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America's Car Loan Debt Is out of Control and Getting Worse

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Illustration for article titled America's Car Loan Debt Is out of Control and Getting Worse
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The sad truth about living in a country that has no real serious commitment to mass transit is that if you don’t live in New York City, Boston, Washington, D.C., or the Bay Area, you need a car to live and work. Cars are great, sure, and we love them, but the shocking rise in delinquent car payments shows the major downsides to car-centric economics.

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More Americans Are at Least Three Months Behind on Their Car Payment Than Ever Before

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And a lot of people don’t have $10,000 or $20,000 lying around, and purchasing power for most people hasn’t risen in decades, meaning car loans are an increasingly necessary fact of life for a good chunk of the car-buying public.

How big a chunk? According to new data from Lending Tree, car loans amounted to $1.14 trillion in total as of September 2018, or about eight percent of all of outstanding consumer debt in 2018, a number that includes mortgages but also things like credit card debt. That number was six percent 10 years ago; you can see where this is trending.

Further, the terms keep getting worse. We looked awhile back at 84-month car loans, increasingly becoming a thing because you people can’t stop buying big trucks. But Lending Tree also reports that payments are rising, with payments averaging $530 per month for new vehicles, up five percent from last year.

 

Here’s a few more tidbits per Lending Tree:

Americans originated a record 2.5 million auto loans in July 2018, the most recent month for which data is available.

[...]

Outstanding auto loan balances are rising about 3.1% a year in dollar amounts.

[...]

Gen Xers carry the highest auto loan balances with a median of $18,741 and are the most likely of other age groups to have a car loan.

The average new car loan originated by a finance company is $29,921.27, an increase of more than $5,000 from 10 years earlier.

Average monthly payments are rising, too:

$530 for new vehicles, up 5% year over year

$381 for used vehicles, up 4%

$430 for a new vehicle lease, up 4%

The average auto loan term in the third quarter of 2018 was 68.5 months, a half-month increase from one earlier.

2.3% of outstanding auto debt is “seriously delinquent” (90 days or more).

That last stat I’m honestly surprised is so low, but it also probably in part reflects our mass transportation crisis. People will do almost anything to keep from having their cars get repossessed, as integral as they are to modern American life. I live in New York City, and I have a car, which is a massive luxury, but I’m also not so far removed from the days when having a car was a necessity for me to live and work. For tons of people in this country—probably most—that’s reality.

 

You can see the full Lending Tree report here if you’re interested, along with a bunch of charts and graphs and such.

 
 

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  • jrjiumbwjpx5iiiy0ee8.jpgZoomErik Shilling

    Cars keep getting more expensive, the amount of money/loan payments are going to keep getting more expensive. The problem is wage growth not matching or exceeding consumer goods.

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    • vzezaztp8rih77winddt.jpgElon's MuskZoom

      This^

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    • ws03uefxpyfjk3emgurp.jpgSXRguyinMAZoom

      Exactly my first thought as well. Cars are getting more expensive much faster than wages are going up so people need to have these 84 month loans. Or just buy used....but then when things break on these newer cars they tend to be much more expensive to fix out of pocket.

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    • koj5oemqxfpqr5h1qnje.pngdavesaddiction is lateral GsZoom

      Wage growth (and disparity) is a definitely problem, but people buying stuff they can’t afford is the larger problem (and lenders facilitating bad choices). If no one was buying them, the average cost of a new car would come down to meet demand. Lots of people need a car, but no one “needs” to buy a new car. You can buy a very good used car for $10k.

      The average new car loan originated by a finance company is $29,921.27, an increase of more than $5,000 from 10 years earlier.

      https://www.nbc.com/saturday-night-live/video/dont-buy-stuff/n12020

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    • 17jcxldy9dbzapng.pngrockymplsZoom

      I think wage growth has been outpaced by inflation since the “recovery” from the Great Recession. 

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  • ylgksogxcxel5ojxeeqi.jpgLeft Lane is for PassingErik Shilling

    Basic math is lost on these folks.....maybe even everyone in the country.

    I make more than the national average ($72k + bonus). I own a house ($1750/month before bills). I contribute little to retirement ($100/month). There is no way in hell I could afford a new car without seriously reconsidering my spending. I would have to eat rice, beans and chicken for every meal and could possibly afford the increased insurance. If I had to stack another $550 into a vehicle, I would be **.

    I own 4 vehicles, totaling about $40k. 3 are sub $8k and one is my money making truck. All are paid for except truck but thats just a business expense. No out of pocket money. 

    Yet in traffic I see people, or even the people who I employ and know they make less than myself, are driving around in newer vehicles with +$35k MSRPs. I just dont understand.

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    • 17jcxm3lnjqwmpng.pngfoghelmutLeft Lane is for Passing

      Hell, I CAN afford $550 per month on a car and I wont do it because its too much money.

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    • 17jcxgagdkuylpng.pngandyindividualLeft Lane is for Passing

      chicken

      Fanceee!

      But you are absolutely right about the disconnect people have with financial reality and their expectations.

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    • 17jcxs2o2s3mupng.pngmodularfordfanLeft Lane is for Passing

      Preach. Don’t forget, cars are depreciating assets. For most it’s the second most valuable possession behind someones residence.

      I have to remind myself that it’s not common sense for most that tying up a huge chunk of your net worth in a depreciating asset isn’t a wise financial move. And people wonder why they’re broke. 

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    • stzaw2orm8dlrz9rcayi.jpgsanta clauseLeft Lane is for Passing

      I see the exact same thing. I make a decent 6 figure income yet still drive an old truck I’ve had for 20+ years. Yet on a daily basis I’ll see some construction guy driving to work in an $80,000, fully lifted bro-dozer. I assume they are up to their eyeballs in debt.

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  • 18thjooo4kxeijpg.jpgmarshknuteErik Shilling

    Out of pure curiosity, how much cheaper would cars be if we told the NHTSA to fuck off and let manufacturers sell cars with 0-star crash ratings?

    For some reason I’m not allowed to buy a car unless it has ABS, airbags, backup cameras, seatbelts, crumple zones, etc...but I can legally ride this:

     

    Dafuq???

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    • ohj07hrvxqwngxk1bxif.jpgI Promise English Is My First Languagemarshknute

      Good idea about easing up on the safety regulations, but insurance would go through the roof, even for people with perfect driving records, because (theoretically, anyway) there would be a lot more medical bills as crashes would be more severe even if there weren’t more than there are now

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    • shqstkbjzfhtphqn3jgv.jpgmyfuncarisamotorcyclemarshknute

      I firmly believe that if motorcycles were invented now, rather than over 100 years ago, there would be no way in hell that they'd be legal on the road.

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    • lrf5tecvclvendprwfob.jpgTrevor Slattery, ACTORmarshknute

      People without money end up buying older cars without the latest safety technology anyways. I am surprised the gov’t and the manufacturers don’t get this.

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    • 1839xjljdfwkbjpg.jpgBigHarvmarshknute

      I mean, you can sell a Nissan Micra with all of that for 12k Canadian brand new (seriously, 2019MY listed on autotrader). Maybe not the backup camera? Expectations for luxury and demand for vehicle size and especially height set a lot of these prices; I think there is a not insignificant cultural component in the States. The attitude varies in Canada across the country; I think Quebecois are more willing to buy a bone stock cheapo hatchback than most of the rest of the country, as more of them are willing to accept a car as a simple tool that needs to be replaced every so often. 

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  • bcyhchocmuntmx2jdmlq.jpgHayden LorellErik Shilling

    It expensive to be poor in America.

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    • fjqropdy0lun59krk2cf.jpgMargin Of ErrorHayden Lorell

      Imagine if you’re sick and poor

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    • 17jcxnuqmm7depng.pngput-some-turbo-on-meeeeeHayden Lorell

      This should really be the official motto of America.

      It’s amazing how much a $1000 buffer can make in terms of savings on “being poor taxes” (bank fees, short-term lending costs, etc) over a year.

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    • bcyhchocmuntmx2jdmlq.jpgHayden LorellMargin Of Error

      Been there....damn near killed me...

      .

      .

      .

      .

      .

      Yea I made that pun, sue me.

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    • 17mo3pvdmwa03jpg.jpgRevengencerAlfHayden Lorell

      True, but not really relevant to this. If this was an article about the ready-credit type companies that charge usurious rates so some poor single mom can get a beater for a couple grand and keep her job, it would be, but it’s not.   

      Nobody paying $20k+ for a vehicle has to pay that much to satisfy their genuine needs, and nobody in their goddamn right mind is paying $530 a month for what they actually need. Even the $381/mo average for used vehicles is notably excessive. Nobody needs that.

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  • 183n7izzni6s8jpg.jpgstayingclassyErik Shilling

    so what this says is to start prepping for a new credit crisis?

    yeesh

    again

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    • prav2rheb0cxlottj1j6.jpgRichard Dawson's Ghoststayingclassy

      Thankfully I’m not in need of much credit in the foreseeable future.

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    • 17jcxs2o2s3mupng.pngV10omousstayingclassy

      This will be different than the mortgage crisis because:

      -While large and growing larger, auto debt is a much smaller fraction of the economy than mortgage debt was or is.

      -Cars are much easier to repossess and resell than houses. You won’t have as bad of a cascading effect from foreclosures driving down home prices even further. If a bunch of repossessed cars hit the auctions all at once, there might be some softening of used car prices but nothing like the 2008-2011 housing market.

      -People don’t “need” to own a house the same way they “need to own a car. There will always be a more robust floor of demand for cars for this reason

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    • ewgiw4kq5x4jrnmpsfiw.jpgAfromanGTOV10omous

      FYI Some lenders are giving out zero down loans again for houses. The people they are targeting cannot afford a home, and should wait until they have a large enough down payment to avoid pmi. 

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    • 17jcxldy9dbzapng.pngPenguinsftwstayingclassy

      total outstanding debt is ~10T. 2.6% of $1.140T is ~$26B.

      $26B of seriously delinquent doesn’t even register in the $10T world of debt.

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