Buying a car is becoming an increasingly expensive proposition, affecting new and used car loans. The average cost of a new vehicle topped $34,000 in December 2016. The average price of a used car exceeded $19,000, an increase of 4.3% over the previous year. (See: Buying a Car? Read This Financial Advice First.)
With list prices climbing, the amount buyers are financing is also on the rise, with payments for new cars reaching a record high. A new report from Experian sheds some light on what drivers are paying to obtain a new – or used – set of wheels.
New and Used Car Loans by the Numbers
Experian’s data shows that the average loan for a new car reached $30,621 through the fourth quarter of 2016. That figure is $11,292 higher than the average loan for a used car during the same period. Overall, that amounts to a record gap between what drivers are borrowing for new cars versus used ones. (See: 5 Ways to Buy a Used Car.)
When broken down by credit rating, drivers who landed in the prime credit category borrowed the most for a new car, at $31,502. Those with deep subprime credit scores carried the lowest average new car loan balance, at $25,100. That same credit class tended to finance the lowest amount for used cars as well.
In terms of the monthly cost of a car loan, new car drivers are paying an average of $506 while used car drivers have an average payment of $364. Those amounts represent increases of $13 and $5 over the fourth quarter of 2015. The average loan term for new cars increased slightly from 67 to 68 months, while the average loan term for used cars stayed the same, clocking in at 63 months.
Experian found that interest rates for new car loans rose slightly, with the average rate moving up from 4.63% to 4.74%. The average used car loan rate dropped, however, from 8.78% down to 8.50%. Among super prime borrowers purchasing new cars, the average rate was a low 2.63%. At the other end of the spectrum,…