With the brutal winter that much of North America endured, it was expected that a lot of consumers would return to the open road once the weather started to improve. The data suggests that Americans did exactly this.
According to a new report by Experian Plc (via Reuters), a financial information resource, a record number of United States consumers took out new loans in the second quarter to purchase vehicles, particularly used cars.
The data revealed that 85 percent of new car purchases and 53.8 percent of used car buys were financed in the second quarter. This is up 0.5 percent and 0.9 percent, respectively, from the same time a year ago.
Many industry analysts are looking at one important point of the study: the size of the auto loans and monthly payments continued the rising trend, especially for used vehicles. For the past year, the average auto loan for used cars has risen 1.9 percent to $18,258, while the average monthly payment has gone up 1.1 percent to $355. Both figures are all-time highs.
Financial institutions were the biggest lenders to consumers as they represented more than one-third (35.6 percent) of all purchases. This isn’t necessarily surprising to some experts who say banks have been maintaining a focus on the used car market in recent years.
“More and more consumers, especially those that are credit challenged, are turning to the used vehicle market as a viable option to purchase their next car,” said Melinda Zabritski, senior director of automotive finance for Experian, in a statement.
However, government regulators are concerned over the fact that banks are lending to borrowers with low credit scores, allocating loans that are larger than what the vehicles are worth and expanding the length of the terms on car loans. It should be noted, though, that the amount of loans that were given to borrowers with subprime credit scores fell.