Car loan statistics — How much debt do Americans take on to get behind the wheel?

Everyone wants to peel off the lot in a new car. But not all buyers can peel back their stack of cash and hop in the driver’s seat without some type of financing. Turns out when it comes to buying cars, a lot of us need a financial jump-start.

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How much debt do Americans take on to get behind the wheel?

In 2016, Americans applied for and racked up $564.6 billion in auto loans. By the end of 2017, that number had jumped to $568.6 billion.

The auto loan industry has seen consistent gains with no signs of slowing over the past six years. Still, many of us appear to be missing payments: 4.1% of active accounts were delinquent 90 days or more at the end of 2017.

A brief background on auto loans

A car loan allows a buyer to get behind the wheel without fronting the full cost of the vehicle. Sounds good, right? Well, most loans come with fees and interest that you pay back over the course of the loan.

For an idea of the credit score auto loan companies look for, 707 is middle of the road. But even if your score is lower, you’ve got options for borrowing loot to buy a car. Many banks, credit unions, online lenders and dealerships specialize in auto loans.

Many auto loans are secured by your car, using it as collateral for the loan. Secured loans can mean lower APRs than unsecured options, saving you money in the long run. But you run the risk of the lender repossessing your car if you’re unable to pay it back.

How many Americans have car loans?

If you were in the hot seat, could you guess the percentage of Americans that are currently paying off a car loan? A high 44% of American adults — nearly half of us — are relying on an auto loan to pay for our car.

Let’s look at how auto loans stack up each year.

Number of car loan accounts in the US by year

YearNumber of accounts in millions

Source: Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit for 2017:Q4

Average loan amounts for new and used cars

Americans appear to have no problem signing on the dotted line to finance a vehicle, no matter the cost.

How much we’re borrowing differs by where we’ve shopped for our new or used car:

  • The average loan amount for a new car was $31,099 in 2017, averaging a $515 monthly payment.
  • The average loan amount for a used car purchased at a franchise was $21,375, resulting in an average monthly payment of $398.
  • The average loan amount for a used car purchased at an independent dealer was $17,002, resulting in an average monthly payment of $348.

Your new car loan could come in a low average interest rate of 5.11%, depending on your creditworthiness. However, franchise cars average a loan rate of 7.68%, while an independently used car’s rate averages 11.48% — more than double that of a loan on a brand-new car.

Average loan amount, monthly payment and rate by car type

New carsFranchise used carsIndependent used cars
Average loan amount$31,099$21,375$17,002
Average monthly payment$515$398$348
Average interest rate5.11%7.68%11.48%

Source: Experian’s State of the Automotive Finance Market for Q4 2017

Auto loans vs. other types of debt

It’s not just loans to get from Point A to Point B. Americans take on debt for homes, school and even not-so-big everyday purchases.

Mortgages make up 67.63% of America’s debt — which makes sense, considering a house is typically the most expensive purchase people make in their lifetime.

Student loans account for 10.5% of personal debt, while auto loans inched to 9.28% in 2017.

The two smallest forms of debt Americans took on last year were credit cards (6.17%) and home equity lines of credit (3.48%).

Here’s how auto loan debt figures into the total US debt balance since 2003.

Car loan percentage of total US debt balance

YearPercentage of debt balance

Source: Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit for 2017:Q4

Auto loans and your credit score

For the lowest rates and fees, most auto loans require you to meet eligibility — your credit score the most important factor. Consumers with credit scores of 601 to 780 make up the demographic auto lenders deal with most.

In the auto loans market, credit scores are typically broken down into five categories: deep subprime, subprime, nonprime, prime and super prime.

Here’s how each group borrows for their set of wheels:

Percent of car loan originations by credit score

Year< 620620–659660–719720–759760+

Source: Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit for 2017:Q4

Percentages of deep subprime, subprime and nonprime auto loan originations decreased in 2017. But prime and super prime auto loans increased.

Where do Americans get their auto loans?

Consumers with prime credit scores represent the majority of borrowers. But who’s lending the most when it comes to auto loans?

The total active loan amount across all lenders for 2017 was $1.129 trillion. 😬

Statistics reveal that people prefer the comfort of banks when borrowing for a car. In 2017, banks reported an astonishing $368 billion in open car loans — that’s equal to the price tag of about 4.9 million Model S Teslas! Credit unions report the second-highest open auto loan balance at $313 billion, followed by captive auto companies at $259 billion and finance companies at $189 billion.

What’s a captive auto company?

A captive auto company is a subdivision of a car manufacturer that offers auto loans — think companies like Ford, Honda, Toyota, Chrysler and so on.

The whole car-buying experience takes place house at the dealership. It’s a win-win for the parent company, because it’s not only selling you a car but also making money off the financing.

Total open balance amount by lender type

We gathered the total open balance amount for each type of lender over the past few years.

All banksCaptive autoCredit unionsFinance companies
2017$368 billion$259 billion$313 billion$189 billion
2016$364 billion$252 billion$277 billion$179 billion
2015$337 billion$244 billion$241 billion$166 billion

Sources: Experian’s State of the Automotive Finance Market for Q4 2017, Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit for 2017:Q4

Auto loan delinquency rates

The number of delinquent accounts 90 days overdue increased to 4.05% in 2017 from 3.75% in 2016. The percentage of delinquent accounts has slowly swelled over the past three years.

YearPercentage of loans 90+ days delinquent

Source: Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit for 2017:Q4

Even as the unemployment rate dropped to 4.1% in 2017 from 4.8% in 2016, Americans appear to be struggling to keep up with their finances. Or are they taking on too much at once?

Either way, the last thing you want to do is let your car loan account drift into delinquency. Late or missing payments can punish your credit score and expose your vehicle to repossession by the lender.

Video commentary by Kyle Morgan, auto expert

4 tips to avoid defaulting on a car loan

Setting up autopay is just one way to avoid missing a due date or payment. Other steps you can take to avoid defaulting on your car loan include:

  • Refinance your loan. If your original auto came with unfavorable interest rates and high fees, you might find another provider offering cheaper, more competitive terms.
  • Ask about deferment. By explaining your situation to your auto loan provider — no matter how tough the conversation — it might be willing to defer payments for a specified period, giving you time to catch up on your other financial obligations.
  • Sell your car. It’s a tough decision. But if you consistently struggle to make monthly payments, consider selling your car and using that money to pay back the loan.
  • Get professional help. If you can’t figure out how to make your payments work, a financial consultant can guide you through planning a budget to get back on track.

Consumers default on their auto loans for reasons that include expensive fees, high interest rates or monthly payments that don’t realistically fit into a working budget. And loan approval doesn’t mean that you can afford the car you want, especially for subprime applicants approved for sky-high rates.

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Allan Givens
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Nicole Gallina
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