Monthly New Car Loan Payments Hit Record High Of Nearly $600

Loan payments for new cars escalated to record highs, closing in on $600 per month, CNBC reported on Thursday (March 4), citing data from the consumer credit reporting company Experian.

Experian’s auto financing data is gleaned from the fourth quarter of 2020, which had a bump in new car sales. Borrowing for new vehicles averaged $35,228, about $2,000 more than in 2019, increasing the average monthly loan amount to $576.

Used car loans also reached record highs, with people borrowing an average of $24,467, an increase of nearly $1,700 year over year. Monthly payments hit an average of $413, the first time average used car loan payments were more than $400.

The increase in monthly loan payment amounts coincides with the largest 12-month hike in borrowing, Experian said.

“We went up higher amounts year over year in 2020 than we ever really have before and hit record highs in loan amounts and record highs in payments,” Melinda Zabritski, senior director for Experian’s automotive financial solutions team, told CNBC.

“I can certainly remember when that ($400) was the average payment for a new car,” said Zabritski. “Those days are gone. We’re certainly over $400 and don’t expect to see that come down.”

One of the central reasons for larger loans is because of the unprecedented increase in the price of new vehicles and consumers’ desire for trucks and SUVs, which largely command higher price tags. Also adding to the price of new vehicles is the demand for high-tech options like built-in backup cameras and GPS, according to the article.

The pandemic helped fuel the appetite for used vehicles, further tightening an already-tight market. Prices increased with demand, driving sales to reach some 40 million vehicles sold in 2020, Zabritski said, per CNBC.

Vroom posted fourth-quarter revenue of $405.8 million earlier this week, as more people looked to digital channels to buy used cars and trucks. Sales were up 74 percent year over year with demand for used vehicles exceeding pre-pandemic levels.

The digital shift brought by the pandemic has disrupted how people apply for auto loans, with about one-third of car buyers handling the loan process online.