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Auto Loan Trends in 2023: What You Need to Know
Total Auto Debt Climbs to $1.51 Trillion
As of the third quarter of 2023, total auto debt in the United States reached a staggering $1.51 trillion. This represents an increase of $108 billion from 2022. The rise in auto debt can be attributed to several factors, including increased costs for new vehicles, higher interest rates for both new and used car loans, and longer loan terms.
Average Auto Loan Balance Grows 5.2%
The average auto loan balance in the U.S. increased by 5.2% to $23,792 in 2023. While this is a smaller increase compared to the 7.7% rise from 2021 to 2022, it still outpaces the overall inflation rate, which was around 3% in late 2023. Higher borrowing rates have contributed to this increase, making monthly loan payments more expensive.
Rate of Auto Delinquencies Rises in 2023
Auto loan delinquencies have also seen an uptick in 2023. The percentage of borrowers who were 30 to 59 days late on their auto payments increased to 2.33% as of September 2023, up from 2.18% in 2022. This trend highlights the financial strain many consumers are experiencing.
Auto Loan Balances Rise Across All Credit Score Ranges
In 2023, auto loan balances increased for borrowers across all credit score ranges. Those with poor credit scores saw the largest average balance increase of 8.8%. This is particularly concerning as subprime financing costs, which already carry higher APRs, have risen even more.
Auto Balance Increases Moderate Among the 50 States
Although the increases weren’t as severe as in 2022, auto balances still rose in every state and Washington, D.C., in 2023. California, New York, and New Jersey led the nation with average balance increases of 7% or higher. Texas had the highest average auto balance at $29,164.
Generation X Still Carries the Highest Auto Loan Balances
Generation X continues to carry the highest auto loan balances, averaging over $27,000. This is nearly $3,000 more than the average balance of millennials, the generation with the next-largest auto loan balance.
What’s in Store for Auto Lending in 2024
Looking ahead to 2024, interest rates are expected to moderate. The Federal Reserve has indicated that it may begin lowering rates, which could lead to lower average monthly payments for new car loans. Additionally, increased vehicle inventories are likely to result in more dealer incentives for consumers.
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