Attractive rates for new car loans helped fuel auto sales. (Spencer Weiner / Los Angeles…)
Auto sales continue to grow despite payroll and income tax increases and economic uncertainty caused by the continuing federal budget battles in Washington D.C. Attractive loan rates are a big factor, according to the latest data from Experian Automotive.
“Lower interest rates and longer loan terms made it easier for consumers to finance a vehicle while keeping their payments affordable,” said Melinda Zabritski, director of automotive credit for Experian Automotive. “This, combined with the fact that more vehicle loans went to consumers with credit outside of prime, portends a vital and healthy automotive market.”
Compared with the same period a year earlier, U.S. auto sales have risen more than 8% through the first two months of this year, to more than 2.2 million vehicles, according to Autodata Corp. That comes on top of a 13% gain in 2012.
The relatively high values in the used car market compared with pre-recession pricing also make it easier for people to trade in an older car for a new vehicle now, Zabritski said.
Other factors behind the increase include an aging American car fleet, a result of people putting off purchases during the recession and several subsequent years, and a flood of new models to the market.
Experian said that on average, car buyers borrowed $26,691 for a new vehicle in the fourth quarter of last year. That’s up $272 from the same period a year earlier. The average used vehicle loan was $17,629, up $239 from the same period a year earlier.
But despite borrowing more money, monthly payments decreased slightly because of favorable interest rates.
The average interest rate for a new vehicle loan in the quarter dropped to 4.36% from 4.52% in the prior year. That pushed down the average monthly payment for a new vehicle to $465 during the quarter from $468 a year earlier. Meanwhile the average term of a new car loan increased to 65 months from 63 months.
The average rate for a used vehicle loan dropped to 8.48% from 8.67%.
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