According to Experian, used car loan amounts have skyrocketed – up more than 20% in Q4 2021. Given that prices are up just over 8% year-on-year the other in the fourth quarter of 2020, this is a huge increase. Here’s a look at what high used car prices mean when it comes to loan amounts for consumers.
As shown in Experian’s State of Automotive Market Share report for Q4 2021, average used car loan amounts increased 20.59% year-over-year to 27 $291. This is an increase of $4,661 over the previous year. These skyrocketing costs aren’t short-lived either. The average loan term for a used car in the fourth quarter of 2021 was 67.36 months, or almost six years, for an average monthly payment of $488 in total.
The average monthly payment has increased by around $75 for almost all credit levels. The highest average monthly payment now stands at $507 for subprime borrowers and $505 per month for near-prime. High-risk borrowers paid an average of $497 per month, while premium and superprime borrowers paid $480 and $464, respectively.
While the average used car loan amount reached $29,065 for prime borrowers and $27,722 for those with the best credit ratings, it was somewhat lower in other credit segments, 19 $253 for deep subprime, $22,818 for subprime, and $27,473 for near prime.
This steep price increase may not diminish anytime soon, in today’s automotive landscape. Between Covid, supply chain disruptions – past and present – and ongoing chip shortages, used car prices could stay on the rise for the foreseeable future.
This means getting a good deal on your next car may be the only way to get an affordable vehicle that meets your needs. Unfortunately, some automakers aren’t advertising a lot of incentives right now, and you might have to dig deep to find the right deal.
When looking for a way to make your next used car affordable, remember that this spike in used car prices also means your trade-in could be worth more. Using trade-in value can be a great way to lower the cost of your next vehicle.
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