By on August 11, 2015


Credit-reporting agency Equifax says that as of June 2015 more than $1 trillion has been loaned or leased in the United States. The total dollar amount is 10.5 percent higher than last year.

The average loan amount is $20,800, which is a 3.65 percent increase over last year, and the average sub-prime loan is $18,200. Sub-prime loans comprised 23.5 percent of newly originated auto loans.

More than 9 million new loans were made up to April 2015, which is a 5.8-percent increase over last year. Overall, more than 73.7 million cars are financed through loans in the U.S.

Now that the average car loan is six years or longer, buyers may be able to afford taking longer, more expensive loans, and rising consumer confidence may spur more people into buying.

“Strong sales numbers in both the new-car and used-car markets, coupled with the availability of quality financing for consumers are a few of the main reasons the industry has reached the one trillion dollar mark,” Dennis Carlson, Deputy Chief Economist at Equinox, said in a statement. “It clearly reflects that the improving economy has provided the impetus for consumers to replace their aging vehicles and begin to satisfy their pent-up auto demand.”

For context, the current student debt burden in the U.S. is around $1.2 trillion, which some have said is an “epidemic,” (although college debt usually doesn’t have any collateral). And if the sub-prime figure raises an alarm, David Ruggles has a fairly cogent argument why that may not be a bad thing.

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19 Comments on “Auto Loans Top $1T; Sub-prime Loans Grow 10 Percent Over 2014...”

  • avatar

    So what happens in the next economic downturn to anyone who is only 2 years in on their 7 year financing?

    Oh that’s right, the same thing that happened in the last down turn to people who were 2 years in on their 5 year financing.

    Only they’ll be even more under water.

    That’s OK, we can make bankruptcy even harder and bail out the too big to fail banks again.

    We learned nothing.

    APaGttH – car loan free and plans to keep it that way if he can

  • avatar

    Back in the day, a salesman might look at someone point blank and say “you’re just not a new car kind of guy.” Now you see new Challengers and Camaros in the ‘hood all the time. Of course since all of our good paying blue collar jobs are gone, how else are the taxpay. . . I mean automakers gonna sell these cars?

  • avatar

    This is excellent news. With the country in full recovery and unemployment no longer a problem and inflation not a problem, everyone should be getting loans to buy new cars. Even the subprime borrowers are doing well enough to pick up $18k rides. Everyone who wants a job has a job and that’s why so many people are buying new rides.

  • avatar

    Though you’d never know it from reading the TTAC party line, the increase in the average amount of time a new vehicle is held by the purchaser closely tracks the increase in loan length. This demonstrates that on the whole, people are NOT buying vehicles they cannot afford and having to trade them in (or lose them) while upside down.

    From a comment I posted last week about Steve Lang selling to “Keepers”:
    The IHS looked at registrations recently and determined that the average new “light” vehicle (meaning non-commercial vehicles) is held by the original owner for 77.8 months. (And this is up 26 months from this measure in ’06.) The average new car loan length is only 67 months. Used cars are held for an average of 63 months, which is up 25 months. (I don’t have data about loan length for used cars.)

    While certainly the left edge of the bell curve holds some irresponsible folks (and an inordinate number of automotive journalists), on the whole it appears that the average consumer is quite responsible, holding on to the car well after it’s no longer upside-down, and in many cases well after it’s paid off.

    • 0 avatar

      I see this as a tremendous change in car buying habits.
      In a decade,Americans have gone from buying a new car every 4 yrs to buying one every 6 yrs. Over a 12 yr span that would be a 33% decrease in new cars bought by previous new car buyers.

  • avatar
    Sgt Beavis

    OK, so a crap ton of people have taken on debt to buy a car.

    So what.

    Go find me the percentage of those loans that are in default or late. Is that number higher than normal or trending upwards? Those are the numbers that matter.

  • avatar

    Listen closely; lend me your ears.

    During any economic downturn, and the next one will be no different – the very first things businesses do, as it’s the largest single cost they incur, and by a wide margin, is cut positions/layoff employees.

    That’s when you’ll see defaults & delinquencies absolutely skyrocket.

    Given that the U.S. has largely morphed, and continues to morph, into a service sector economy (FIRE+waitressing/hair stylists/dog groomers/Food-Retail workers), the next downturn will expose more bad/spoiled loans than the prior ones.

    • 0 avatar

      Dude you forgot the bartenders.

      Btw I require a refundable cash deposit when my ears are borrowed.

    • 0 avatar

      Actually, unemployment is a lagging indicator, not a leading one. Which means that we’ll be well into a downturn (as in 2007-2008) before companies start cutting people in significant numbers.

      “Skyrocket” is a relative term. We may expect that people who lose their jobs have trouble making car payments, but I don’t see how that would translate into the apocalyptic scenario you’re trying to paint.

  • avatar

    I thought that the economic depression that we narrowly avoided in 2008 was a wake-up call about building an economy on a bubble of bad debt.

    • 0 avatar

      True, but isn’t all debt to some degree bad?

    • 0 avatar

      The U.S. economy and those of many developed, and even emerging ones (even rapidly emerging ones such as China’s), are now dependent upon the “inflating & chasing bubbles” mantra (bubbles blown by monetary policy).

      Bubbles in housing/real estate, tech stocks, commodities, etc.

      Bubble chasing economies produce larger and harder downturns than normal business cycle ones.

  • avatar

    Meanwhile, people that save their money and THEN buy a car are punished with higher prices.

    If we (the taxpayers) didn’t implicitly underwrite all of this bad debt, car companies would sell less cars – and just maybe, prices would reach a lower equilibrium.

    Instead we juice the market with government backed bad debt and crank up prices for everyone.

  • avatar
    87 Morgan

    I believe the the post references sub prime loans. I welcome anyone to name the bank purchasing 7 year (84 month) loans for sub prime borrowers. It may help for us to define sub prime a bit though. Is it the guy with a solid job and one collection from three years ago relating to a medical bill? That guys credit is considered sub prime.

    Or, are we talking about the cat who pays late every month, like clockwork and their personal finances could be best described as a grease fire?

    Person number one, 84 months no problem in the right unit. Person #2, no dice. 60 months, maybe 66. But the lender will want to be 90% of book OTD, and if the score is sub 540 want a nice acquisition fee of 10% or so.

    The banks buying sub prime loans HAVE learned lessons from 08′ and are buying accordingly. What the general public does not see is how the loans are structured, the fees charged to the dealer to buy the loan. Will some go bad? Yup! Will the lender lose any money? Sure, very little though. The underlying asset (the car) almost always has some value, few cases of truly worthless cars repossessed.

    The real scary loans are the ones to the boomer mid level manager who inks up on a 1k stroke for his LX470 on 84 months. Even at a low rate, what happens to that loan when said cat is ‘downsized’ via thinly veiled age discrimination? Those are the loans that will explode.

    • 0 avatar

      Santander and Skopos Financial for two. Skopos is lending to those with credit scores as low as 360. GM Financial is 86% sub prime.

      “Originate to sell”: make the loans then sell to Wall Street financial entities who bundle them and sell them as “asset backed securities”. Pump and dump. Going into mutual funds 401ks and pension plans even as we speak.

      And Wall Street needs more subprime loans to keep up with the demand for those securities because everyone is trying to find yield. Finding more ways to write dubious paper is what’s going on. And it will implode at some point.

      What could possibly go wrong ? They haven’t learned a thing since 08.

  • avatar

    You should see all the luxury cars: used Mercedes, BMW,Audi, etc here in Queens NY just waiting for some drug dealer with a lot of cash to walk in and drive off the lot.

    The economic downturn has been so hard on the drug dealers that many have been forced to trade their used BMW M6 in for Hyundai Sonatas.

    (that joke did target someone specific but he doesn’t read this website )

  • avatar

    “Oh, I can do $650/mo…but can we talk about the $800 down?”

  • avatar

    And, I read somewhere we’re on the way to the best car sales year in 15 years…….

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