The purchaser of a new car financed an average of $40,290.00 during the second quarter of 2022, according to credit monitoring company Experian – an increase of 13.2% over the last year’s figure. The price of the average new car has also soared over the past year to $48,182.00 in July, 2022 compared with $42,736 in July 2021.
Overall, incomes have not kept pace with these increases, which have left many working longer than ever to pay off their new cars over ever-increasing terms. As of July, 2022, the average wage earner would need to work 42.2 weeks to pay off the average new car. In addition, the average borrower is now committing to a 69 month repayment term rather than 60 months pre-Covid.
Used car buyers are also borrowing more. Experian reports that the average used vehicle loan last quarter was $28,534.00, nearly 19% higher than one year ago. The average used car price increased in July after several months of decreasing.
Year-over-year, the buyers with the worst credit scores suffered the biggest increase in their monthly expenses. Experian reports that subprime borrowers are paying $97 a month more than they were a year ago, while prime buyers average $83 more.