Outstanding auto loans and leases combined hit $884 billion as of April 30, a record high and a 10.8 percent increase from the same date a year ago, credit bureau Equifax reported this week.
Even though the average amount borrowed is on the rise, affordability doesn’t seem to be a problem, says Dennis Carlson, assistant deputy chief economist for Equifax.
“While automobiles are more expensive than they have been in the past, when you adjust for inflation, cars are actually quite affordable compared to what we have seen in the past,” he told Automotive News in an e-mail.
The average loan amount for a new and used vehicle in February 2014 -- the latest amount Equifax had available -- was $19,482, up 3.3 percent from the year-earlier period, the company said.
But low interest rates are keeping monthly payments affordable, Carlson said. They also help dealers to sell additional things, such as service plans, since dealerships can say something like “It will only raise the monthly payment by $9 a month,” he said.
Auto loan delinquencies remain near record lows, which is a good sign customers aren’t overextending themselves, Equifax said.
“People are comfortable borrowing more because they are more confident in both today and the future,” Carlson said. “In the past, someone might have said, ‘I can afford this today, but what if I lose my job?’ Today, they are feeling more confident, and think ‘I can afford this.’”
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