A growing number of new vehicle loans are surpassing the $1,000 monthly payment threshold, with the majority not associated with luxury models, according to new data from Experian Automotive. The analysis of over 5 million open auto loans and leases in the first quarter revealed that nearly 19% of new vehicle loans now include a monthly payment of at least $1,000. This figure represents an increase from approximately 17.4% in the previous year.
Melinda Zabritski, head of automotive financial insights for Experian Automotive, clarified that the assumption that these high payments are exclusively for luxury vehicles is incorrect. "The assumption is that it's all luxury, it's high-line, and that is not the case," Zabritski stated. Data indicates that almost 74% of auto loans with monthly payments of $1,000 or more are for non-luxury models. The top five most financed models in this category are popular pickup trucks, including the Ford F-150, Chevrolet Silverado 1500, and Ram 1500, as reported by Experian.
This trend marks a significant shift from just five years ago, when auto loans with monthly payments exceeding $1,000 constituted only about 5.4% of the market. The automotive landscape began to change notably with the global chip shortage that impacted production in 2021 and 2022. During this period, automakers globally prioritized the manufacturing of higher-end, more profitable vehicles. Consequently, vehicle prices escalated, leading to a substantial increase in the average amount borrowed for auto loans.
Zabritski observed that these elevated prices have reshaped consumer perceptions regarding the financing of new vehicles. "We haven't seen a reduction in that MSRP, and in those high loan amounts," she told CNBC. She added, "I think as time goes on, I think more consumers are getting used to the $1,000 payment."
Experian Automotive also reported that the average amount borrowed for a vehicle is now at an all-time high of $43,952, with the average monthly payment climbing to a record $770. These figures are seen as a reflection of the current strength in the new auto market.
Regarding auto loan delinquencies, the percentage of new vehicle loans with payments more than 30 days late has risen to 2%. The 60-day delinquency rate has also seen an increase. However, Zabritski pointed out that delinquency rates currently remain below levels observed in 2018. She further noted that the primary driver for 60-day delinquencies is within the subprime market, where lower credit scores correlate with a higher propensity for default.
