Coming into this year, the average used car loan amounts are still soaring off near-record highs for the first quarter of 2022, according to Experian's State of the Automotive Finance Market Report. Here's a look at what's happening with used car loan amounts and what it means for consumer auto loans.
Used Car Loan Amounts Soar
Often, borrowers opt for used vehicles because they're looking for a deal out of necessity. This could be even more true if the trend of rising used car prices continues. Last quarter, the average used car loan amount surged reaching 24.88% higher than loan amounts a year prior. That average amount financed – $27,945 – is $5,567 more expensive than the average loan funded in Q1 2021.
Average Used Car Loan Amount Varies By Credit Score
Loan amount averages vary by credit tier, and all of the averages are up year over year from the overall loan amount, to the monthly payment, and even loan term. Here's how the averages shake out based on FICO score range:
- Deep Subprime borrowers (300 - 500) are paying an average of $425 a month for 60.44 months, with an average loan amount of $15,699.
- Subprime borrowers (501- 600) are paying the most per month, $427, for 64.12 months, with an average loan amount of $18,246.
- Near-Prime borrowers (601 - 660) pay around $424 on average for 67 months, and have an average loan amount of $22,298.
- Prime credit tier borrowers (661 - 780), pay around $407 a month for 66.95 months and have the highest average loan amount of $24,026.
- Super Prime borrowers (781 - 850) pay an average of $405 a month for 63.28 months and have an average loan amount of $23,580.
It's too soon to tell if this surge in prices for used cars has peaked, but it's important to be prepared in case prices continue to rise. Though all amounts are up year over year, they're nowhere near the rates we saw in Q4 2021.
Save Money on a Used Car Loan
To help get the deal that's right for you amid rising auto loan averages, it's important to know how you can save when it comes to financing. Here are five ways to save the most money overall.
- Research deals and incentives – If you're a qualified buyer you may be eligible for deals and incentives such as low APRs or bonus cash offers. Not all automakers offer these, so check with a dealer to see what's most affordable.
- Prepare a down payment – Using a down payment means borrowing less and paying less in interest charges overall.
- Use a trade-in – With the cost of used cars soaring, your trade-in could be worth more than you expect. Combining a trade-in with equity to your down payment can save you even more.
- Choose the shortest loan term – The longer you have a loan balance the more you pay in interest charges.
- Pay taxes, title, and license fees upfront – If you pay these fees up front and don't roll them into your loan payment, you save in interest.
With the high cost of getting a used car loan these days, it's important to save where you can. We don't know if loans will continue to get more expensive as this year goes on, or how much more prices will climb, so do what you can to get your best auto loan deal by being prepared.