Consumers in the United States respond to the rising cost of new cars by going deeper into debt. The average loan for a new vehicle is at a record-high of $40,290 during the second quarter, according to Experian, the credit monitoring company.
The American company released its latest report on the automotive finance market on Thursday, 25 August, citing that the average amount borrowed had risen up to 13.2 percent. The average monthly payment for a new vehicle loan went up to $667 in the second quarter, which is a 15 percent increase from the previous year.
However, the duration of the average new vehicle loan stayed consistent in the second quarter of 2022 as opposed to a year ago at just a little more than 69 months.
It has been observed that used car buyers are also borrowing more. The average used car vehicle loan rose to $28,534, up 18.7 percent with an average monthly payment of $515, up 17 percent, as per a report by the CNN.
Even though the Federal Reserve has raised interest rates in an attempt to reduce borrowing, the prices of new vehicles in the United States have been skyrocketing even faster than the overall inflation rate. Automakers are still not able to meet the rising demand due to a shortage of semiconductors in addition to supply chain issues bleeding over from the pandemic.
The price of the average new car or truck reached a record $46,259 in August 2022, according to the J.D Power market research firm.
About 60 percent of the vehicles financed in the second quarter of 2022 were sport utility vehicles while used vehicles amounted for 61.8 percent of all vehicle loans during the second quarter, as compared to 58.5 percent a year ago.
(With inputs from CNN)