09/12/2024 | Press release | Distributed by Public on 09/12/2024 08:04
While the price of financing a vehicle via the interest rate has increased, as shown in last week's chart, so has the cost of the vehicle itself. This week's chart shows the average initial loan principal, a reasonable proxy for price trends in the auto market, based on origination date. A car buyer, either new or used, in 2022 and 2023 paid a significantly higher price than a car buyer in 2019. Comparing December of 2023 with December of 2019, the average principal on a new auto loan was 37.2 percent higher and the average principal on a used auto loan was 23.5 percent higher. Supply chain issuesduring the pandemic created inventory challenges in the new car market, affecting both dealers and consumers. Buyers who could not get a new car were pushed into the used car market, increasing demand and driving up prices for those automobiles.
Auto loan payments taking a greater share of consumer budgets could put stress on some account holders' finances - especially those living paycheck to paycheck each month. Financial institutions should keep in mind that consumers are keeping their cars for a longer period of time. Instead of suggesting a new loan to account holders who recently paid off an auto loan, financial institutions should consider suggesting other uses for that money, such as setting up an automatic transfer to a savings or investment product each month.