The recent evolution of auto loans

The FRED Blog has discussed recent developments in commercial real estate and consumer credit card lending. Today, we dive deeper into the topic of consumer lending by focusing on the latest data on consumer auto loans.

The FRED graph above shows data from the Federal Deposit Insurance Corporation (FDIC) on the dollar value of three different types of loans made to individuals: credit card loans (blue area), auto loans (red area), and other loans (green area).^* We adjust the data, available since 2011, for consumer price inflation to facilitate their analysis over time.

The dollar value of auto loans made to individuals steadily decreased between the second half of 2022 and the time of this writing. That decrease is easier to see in this FRED graph of the same data plotted in year-over-year growth rates. What could explain this trend?

Juan M. Sánchez and Masataka Mori at the St Louis Fed studied the evolution of auto loans according to the income level of the borrower. Their analysis finds that the percentage of rich borrowers with auto loans markedly declined after 2019. In other words, fewer high-income households are borrowing to purchase vehicles. Higher interest rates on auto loans could be driving those borrowers to make these vehicle purchases by drawing on their savings or using other types of loans.

For more about this and other research, visit the publications page on the St. Louis Fed's website, which offers an array of economic analysis and expertise provided by our staff.

^*This is shown as the difference between "Other Loans to Individuals" and its subcategory "Auto Loans."

How this graph was created: In FRED, search for and select "Balance Sheet: Total Assets: Loans to Individuals: Credit Cards." Next, click the "Edit Graph" button and use the "Line 1" tab to customize the data by searching for "Consumer Price Index for All Urban Consumers: All Items in U.S. City Average." Don't forget to click on "Add." Next, type the formula (a/b)*100 and click on "Apply." Next, use the "Add Line" tab to add the other two series: "Balance Sheet: Total Assets: Loans to Individuals: Other Loans to Individuals: Auto Loans" and "Balance Sheet: Total Assets: Loans to Individuals: Other Loans to Individuals" to the graph. Follow the steps described above to customize the data. Use the "Format" tab to change the graph type to "Area" and select stacking "Normal."

Suggested by Melanie LeTourneau and Diego Mendez-Carbajo.