Motorists Are Borrowing More Than Ever to Purchase New Vehicles
Car buyers are spending more than ever to purchase vehicles, according to recent data from Experian. As cars become more expensive and consumers borrow more money to buy them, the potential for financial loss when vehicles are defective only rises. If you buy a new car and it turns out to have serious problems, you should contact a San Diego lemon law attorney as soon as possible to pursue an appropriate legal remedy.
Car Buyers are Borrowing More Than Ever for New Vehicles
Experian prepared a State of the Automotive Finance Market Report highlighting the rising costs of new vehicles for motorists. According to the report, the average monthly car loan payment on a new car reached $523 per month, which is a new record high.
Payments are higher because people are buying more expensive cars than in the past and are borrowing more to do it. The average amount that a new vehicle purchaser borrowed in the first quarter of 2018 was $31,455, which is the highest amount that car buyers have ever borrowed. The average per capita income in the United States is just $31,000, which means that car buyers are taking out loans worth around a year of their total salaries which is not sustainable according to the senior director of automotive financial solutions for Experian.
Interest rates are also rising, which makes buying these expensive cars even more costly for motorists. The average interest rate on a new car loan was 5.17 percent in the first quarter of 2017, which is 31 basis points higher than it was just a year ago.
Because it's so much more expensive to buy cars, many car purchasers are stretching out the amount of time that it takes them to purchase a new vehicle. The average car loan length went up to 69 months, and 72 months remains the most common loan term for people who borrow.
However, around 24 percent of borrowers finance their vehicles over a period of 85 to 96 months. This is considerably more than the 10 percent of the auto loan market that stretched out their loans for this length of time in 2018. The longer a loan term is, the more expensive it will be to repay the loan because the borrower pays interest over a much longer period of time.
Total automotive loan balances have also climbed to new heights across the United States, suggesting that Americans in general are taking on record amounts of debt in order to buy cars. In the first quarter of 2018, Americans owed a record $1.108 trillion in total automotive loan balances, which is the highest collective amount of auto loan debt ever owed.
There's nothing more frustrating than owing a lot of money on an expensive vehicle that turns out to have serious issues. You do not just have to live with the financial loss if the car that you buy has problems. A San Diego lemon law attorney can provide you with help in pursuing an appropriate legal remedy when your car is defective.