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American Debt: Auto Loan Balances Hit $1.36 Trillion in 2020

Despite the pandemic, consumers kept buying and borrowing

According to the latest Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York, Americans now shoulder $1.36 trillion in auto loan debt—enough to buy 59 million Toyota Camrys at $23,000 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 2020, the credit bureau TransUnion estimated that the average auto borrower had an outstanding balance of $19,646.

Key Takeaways

  • Auto loan debt held by Americans rose to a record $1.36 trillion in 2020.
  • Auto loans now make up nearly 10% of all household debt, the third-largest debt category behind mortgages and student loans.
  • Though total auto loan debt continues to rise, the percentage of delinquent borrowers remains at a relatively low level.
Auto Loans 2011-2020

Auto Loan Debt Increases With Total Household Debt

Our research has shown that auto loan debt currently makes up 9% of all outstanding household debt. Its growth has accompanied a rise in total household debt, which stood at $14.35 trillion as of November 2020, up by $87 billion from the same period a year earlier. Auto loan debt is the third-largest category of American household debt after mortgage debt ($9.86 trillion) and student loan debt ($1.55 trillion), both of which have also increased steadily since 2011.

Not only did the total balance on auto loans increase, but the dollar value of originations, or new loans, rose as well. The New York Fed described it as "a record high...with $168 billion in newly originated auto loans...which includes both loans and leases."

TransUnion, however, reported that the number of originations was down 11.9% year-over-year, with 6.5 million new loans opened in Q2 2020, compared to 7.3 million in the same quarter of 2019. TransUnion noted that the decline was "particularly noticeable among subprime consumers," whose originations fell by 28.1%.

Cheap credit has undoubtedly helped more Americans buy cars during the past year. But if interest rates rise, consumers with variable-rate credit card debt or adjustable-rate mortgages will see their payments increase, which could make it harder for them to keep up with auto loan payments or take on new auto loans.

For now, however, there appears to be reason for cautious optimism. "Balances and delinquency rates across debt products remained largely stable in the third quarter," Donghoon Lee, research officer at the New York Fed, noted in a press release accompanying the new report. "The data likely reflects improvements in economic activity and the labor market, as well as the positive impacts of temporary relief measures provided through CARES Act provisions or offered voluntarily by lenders."

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. Less than 6% of borrowers were 30 or more days delinquent as of Q3 2020, and just over 2% 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 have been more lenient during the coronavirus pandemic.

The median credit score for auto loan borrowers was 712, little changed from a year before, when it was 711. That's considered a "good," but not a "very good" or "excellent" credit score.

The Bottom Line

Americans’ auto loan debt continues to rise. 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.

Article Sources
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  1. Federal Reserve Bank of New York. "Quarterly Report on Household Debt and Credit (2020:Q3)." Accessed Feb. 10, 2021.

  2. TransUnion. "Credit Card Balances at Lowest Levels Since 2017; Holiday Season Credit Usage in the Spotlight." Accessed Feb. 10, 2021.

  3. Federal Reserve Bank of New York. "Total Household Debt Increased in Q3 2020, Led by Surge in New Credit Extensions; Mortgage Originations, Including Refinances, Continue to Soar.” Accessed Feb. 10, 2021.

  4. Federal Trade Commission. "Behind on Car Payments Because of the Coronavirus?" Accessed Feb. 10, 2021.

  5. Experian. "What Is a Good Credit Score?" Accessed Feb. 10, 2021.

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