American Debt: Auto Loan Balances Hit $1.5 Trillion in 2022

Americans now shoulder $1.52 trillion in auto loan debt, according to the latest Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York. That's enough to buy 60 million Toyota Camrys at $25,000 a pop. The current level of auto loan debt is nearly double what it was just 10 years ago, and the figure has risen almost every quarter since 2010. In the third quarter of 2022, credit bureau TransUnion estimated that the average auto borrower had an outstanding balance of $29,169.

Auto Loan Debt Increases With Total Household Debt

Both our research and the research from the Federal Reserve of New York show that auto loan debt currently makes up over 9% of all outstanding household debt. Its growth accompanied a rise in total household debt, which stood at $16.51 trillion as of November 2022, an increase of over $2 trillion since the end of 2019. Auto loan debt is the third-largest category of American household debt after mortgage debt ($11.67 trillion) and student loan debt ($1.57 trillion), both of which have also increased steadily since 2011.

While the total balance on auto loans increased, the dollar value of originations, or new loans, declined slightly. The volume was $185 billion, down from $199 billion in the previous quarter, but still elevated versus volumes seen on average through 2018-2019.

TransUnion reported that the number of originations was down 14.9% year-over-year, with 7 million new loans opened in Q3 2022, compared to 8.2 million in the same quarter of 2021. TransUnion reported that the decrease in new loans occurred due to new vehicle inventory shortages and due to tough comparisons to the third quarter of 2021, which represented the peak of the pandemic auto recovery.

Lenders could benefit from higher costs as interest rates rise. Some may continue to offer lower interest rates to attract new consumers, giving them an edge over their competition. But borrowers may find it challenging to keep up with the cost of borrowing, which makes the potential for a rise in delinquencies very possible.

The Federal Reserve remains cautious about what impact rising prices and rising interest rates might have on consumers. "Credit card, mortgage, and auto loan balances continued to increase in the third quarter of 2022 reflecting a combination of robust consumer demand and higher prices. However, new mortgage originations have slowed to pre-pandemic levels amid rising interest rates."

Auto Loan Borrower Profiles Look Good

Despite the record amount of auto loan debt, Americans as a group have managed to keep up with their car payments. Just over 6% of borrowers were 30 or more days delinquent as of Q3 2022, and less than 5% were 90 or more days delinquent.

After 90 to 120 days of delinquency, lenders consider borrowers to be in default and can repossess their vehicles, although some lenders became more lenient during the coronavirus pandemic.

The median credit score for auto loan borrowers was over 700, which is little changed from a year before. That's considered a "good," but not a "very good" or "excellent" credit score.

The Bottom Line

Auto loan debt continues to rise among Americans. An increase in interest rates at some point in the future may cause car buyers to spend less, but for now, consumers’ borrowing and buying habits indicate continued optimism about the economy.