More than 275 million cars are on the roads in the United States.
But in the last few years, owning a car has become more expensive than ever; this is because of the Covid-19 plague, problems with the supply chain, persistent inflation, and interest rate hikes by the Federal Reserve.
“Buying a new car is the second-biggest purchase most people make after buying their first home,” said Joanna Dean, vice president of sales at Toyota Financial Services Group. “Given the prices of transactions and vehicles today, you need financing to buy these cars.”
More than 100 million Americans have a car loan, and the total amount owed on those loans is a record $1.5 trillion.
Experian says the average monthly loan payment for a new car will be $725 in 2023, up from $650 in 2022. In 2023, the average monthly price for a used car is $516, which is 2% more than the previous year.
Melinda Zabritski, the senior director of product management at Experian, said, “Outstanding balances are still going up, and people are still taking out auto loans.” “The number of loans is slightly lower, but the amounts are much higher.”
The terms of a car loan depend on your credit score.
You can get an auto loan from both direct and indirect lenders and use the money to buy a new or used car. Even though customers have choices, your interest rate and terms will depend on the lender you borrow from and the number of things you do.
Lenders set rates and terms based on how sure they are that you can pay back the loan. They examine your income, spending, assets, debts, and credit score.
Peter Muriungi, the CEO of Chase Auto, said, “Our main goal is to get customers into loans they can afford.” “Our customers are our top priority, so we’ve put several steps in place to ensure that’s the case.”
Muriungi says that Chase Auto works with people whose credit scores are at least 620, and the average credit score is in the 700s.
Toyota Financial Services mainly works with people with very high credit scores, meaning they have a “prime credit portfolio.” Dean says that the average is 744.
“But we do want a wider range of businesses,” Dean said. “And those with maybe lower FICO [credit scores] may come to the table with bigger down payments to help make that more affordable.”
Some buyers are not happy with their cars because of problems.
On the other hand, Americans don’t usually have good things to say about getting cars.
Sean Miller, who got an auto loan for his car in 2019, said, “It was a rapid process, and I felt like they just wanted me to sign the bottom line as quickly as possible.”
This choice, taken by the people of Brooklyn, New York, many years ago, is still causing problems for them today.
He said, “Right now, I’m paying a lot of money for a car I don’t need, and I’ve been trying and trying to sell it.” “If I sold it today, I would likely lose between $10,000 and $15,000.
“Right now, this is keeping me from being able to save money to start a family,” Miller said.
American car buyers have filed lawsuits and complaints against many different lenders nationwide, saying that the lenders’ auto loan practices are unfair and illegal.