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U.S. Auto Loan Interest Rates and Delinquencies Q4 2017

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Led by a prolonged period of low interest rates, consumers now have a record $1.2 trillion1 in outstanding auto loan debt. Despite record high levels of issuance, the auto lending market shows signs of tightening. With auto delinquencies on the rise, consumers are facing higher interest rates on both new and used vehicles. In particular, over the last three years, subprime borrowers saw rates rise faster than the market as a whole. MagnifyMoney analyzed trends in auto lending and interest rates to determine what’s really going on under the hood of automotive financing.

Key insights

  • Overall auto delinquency is on the rise, and the first quarter of 2017 saw near-record volume ($8.27 billion) in new severely delinquent auto loans.2
  • Interest rates dipped last quarter, with average new car loan rates down to 5.11%. However, the new rates are still 82 basis points from their lows in late 2013.3
  • The average duration of auto loans (new vehicles) is up to 67.36 months. The longer loans make monthly payments more manageable even as interest rates rise.4
  • The median credit score for an auto loan borrower continues to rise. Currently, the median borrower has a 707 credit score.5
  • More than four out of five (85.1%) new car buyers use financing to buy a car.6
  • Just over half (53.8%) of used car buyers take out a loan to buy a car.7

Facts and figures

  • Average Interest Rate (New Car): 5.11%8
  • Average Interest Rate (Used Car): 8.84%9
  • Average Loan Size New: $29,15410
  • Average Loan Size Used: $17,32111
  • Median Credit Score for Car Loan: 7075
  • % of Auto Loans to Subprime Consumers: 31.1%12

Subprime auto loans

  • Total Subprime Market Value: $243 billion13
  • Average Subprime LTV: 110.5%14
  • Average Interest Rate (New Car): 10.98%15
  • Average Interest Rate (Used Car): 16.27%16
  • Average Loan Size (New Car): $28,60317
  • Average Loan Size (Used Car): $16,55718
  • % Leasing: 23.4%19

Prime auto loans

  • Total Prime Market Value: $747 billion20
  • Average Prime LTV: 96.2%21
  • Average Interest Rate (New Car): 4.03%22
  • Average Interest Rate (Used Car): 5.48%23
  • Average Loan Size (New Car): $32,72724
  • Average Loan Size (Used Car): $21,16225
  • % Leasing: 33.8%26

Auto loan interest rates

Interest rates for auto loans continue to remain near historic lows. Interest rates for used cars is now 8.84% on average. The average interest rate on new cars (including leases) is 5.11%. However, the historically low rates belie a tightening of auto lending, especially for subprime borrowers.

Source: Experian “State of Automotive Finance,” and MagnifyMoney.27

New loan interest rates

Source: Experian “State of Automotive Finance,” and MagnifyMoney.28

Consumer credit information company Experian reports that the average interest rate on all new auto loans was 5.11%, up 82 basis points from the trough five years earlier.29 Compared with the previous year, interest rates are up 37 basis points for new cars. The interest rate increase reflected underlying tightening in the auto loan market for new vehicles.

During the last few years, lenders tilted away from subprime borrowers. In the fourth quarter of 2017, just 9.37% of loans for new vehicles went to subprime borrowers compared with peak subprime lending of 11.48% in the fourth quarter of 2015. The movement away from subprime borrowers led to a smaller increase in new car interest rates.30

Source: Experian “State of Automotive Finance,” and MagnifyMoney.31

Across all credit scoring segments, borrowers taking out loans for new vehicles faced higher average borrowing rates compared with this time last year. Super-prime borrowers took on the largest average rate increase. Rates for this segment rose 54 points to 3.17% on average. Rates for super-prime borrowers are the highest they’ve been since the end of 2011.32

When comparing credit scores to lending rates, we see a slow tightening in the auto lending market since the end of 2013. The trend is especially pronounced among subprime and deep subprime borrowers. These borrowers face auto loan interest rates that are growing faster than the market average. However prime and super-prime rates are slowly starting to tighten as well. Consumers should expect to see the trend toward slightly higher interest rates continue until the economic climate changes.

Source: Experian “State of Automotive Finance,” and MagnifyMoney.33

Even with the tightening, interest rates remain near historic lows for borrowers with fair credit and above. However, the low rates aren’t translating to consumers paying less interest on their vehicle purchases. The estimated cost of interest on new vehicle purchases is now $4,443,34 up 49% from its low in the third quarter of 2013.

Source: Federal Reserve Board of St. Louis, Experian “State of Automotive Finance,” and MagnifyMoney.35

Growth in interest paid over the life of the loan stems from longer loans and higher average loan amounts. The average maturity for a new loan grew from 62.4 months in the third quarter of 2008 to 67.4 months.36 During the same time, average loan amounts for new vehicles grew 17.7% to $29,154.37

Used loan interest rates

Source: Experian “State of Automotive Finance,” and MagnifyMoney.38

Over the past year, interest rates for used vehicles plummeted to their lowest rates ever, but recent movements show that interest rates for used cars may be stabilizing or climbing. Year after year, used car interest rates increased by 34 basis points to 8.84%. The climb in average interest rates came despite the fact that borrowers now have better credit scores than ever before. In the fourth quarter of 2017, almost half of all used-car borrowers (48.5%) had prime or better credit. The year before, 47.8% of used borrowers were prime.39

Source: Experian “State of Automotive Finance.”40

On the whole, borrowers in the used car market face modest increases in interest rates compared with this time last year. The biggest increases came among subprime and nonprime borrowers who saw average rates increase by 57 basis points (.57%) and 52 basis points (.52%) respectively. The rate for subprime borrowers is now 16.27% on average — nonprime borrowers face rates of 10.01%. Interest rate hikes for subprime borrowers are part of a broader trend that started in 2009. Since 2009, interest rates for subprime borrowers are up nearly two full percentage points, and interest rates for deep subprime borrowers are up 3.5 percentage points.

Super prime and prime borrowers were somewhat insulated from the modest rate increases in the used market. Their rates rose by an average of 41 and 39 basis points respectively. Average rates for borrowers with super-prime credit is up to 3.8% — the prime rate to 5.48%.41 Despite the recent increases, interest rates for prime borrowers are still near historic lows.

Source: Experian “State of Automotive Finance” and MagnifyMoney.42

Rising interest rates mean that consumers are putting more money toward interest than they have in the past. The estimated total interest on a used car loan today is $4,202, up $454 from this time five years ago. Rising interest rates are not the only factor driving up interest rate expenses. A more important factor in the total interest cost is the longer average loan terms for used cars (61 months vs. 58 months),43 leading to more interest paid over the life of a car loan.

Source: Federal Reserve Board of St. Louis, Experian “State of Automotive Finance,” and MagnifyMoney.44

Auto loan interest rates and credit score

As of June 2017, the median credit score for all auto loan borrowers was 70745 The median credit score among auto loan borrowers is at its highest point in six years.

Source: Federal Reserve Bank of New York/Equifax Consumer Credit Panel. 46

In the third quarter of 2017, just 31.1% of all auto loans were issued to subprime borrowers compared with an average of 35% over the past three years. Ally Financial, the nation’s largest auto lender, limited subprime lending to just 8.8% of their auto loan portfolio, and Wells Fargo, the nation’s third largest auto lender, announced intentions to limit subprime auto lending to less than 10% of their auto portfolio. With fewer big banks lending to subprime borrowers, consumers may expect to see rising interest rates in that segment.

Source: Federal Reserve Bank of New York/Equifax Consumer Credit Panel, and MagnifyMoney.47

Total auto loan volume decreased dramatically between 2008 and 2010. During that time, subprime and deep subprime lending contracted faster than the rest of the market. Since early 2010, auto lending rebounded to near pre-recession levels, but subprime lending lagged in recovery. In the fourth quarter of 2017, banks issued $42.7 billion to subprime borrowers, well under the average $48.2 billion of subprime auto loans issued each quarter between 2005 and 2007.

Source: Federal Reserve Bank of New York/Equifax Consumer Credit Panel.48

Loan-to-value ratios and auto loan interest rates

One factor that influences auto loan interest rates is the initial loan-to-value (LTV) ratio. A ratio over 100% indicates that the driver owes more on the loan than the value of the vehicle. This happens when a car owner rolls “negative equity” into a new car loan.

Among prime borrowers, the average LTV was 96.18%.* Among subprime borrowers, the average LTV was 110.54%.**49 Both subprime and prime borrowers show improved LTV ratios from the 2007-2008 time frame.

*Average LTV reflects only securitized loans.

**Average LTV reflects only securitized loans.

Source: S&P Global Ratings.50

Research from the Experian market insight group51 showed that loan-to-value ratios well over 100% correlated to higher charge-off rates. As a result, car owners with higher LTV ratios can expect higher interest rates. An automotive finance market report from Experian52 showed that loans for used vehicles with 140% LTV had a 3.03% higher interest rate than loans with a 95%-99% LTV. Loans for new cars charged just a 1.28% premium for high LTV loans.

Auto loan term length and interest rates

On average, auto loans with longer terms result in higher charge-off rates. As a result, financiers charge higher interest rates for longer loans. Despite the higher interest rates, longer loans are becoming increasingly popular in both the new and used auto loan markets.

The average length to maturity for new car loans in the third quarter of 2017 is 67.4 months.53 For used cars, the average is 61.25 months.54 Loans for both new and used cars are now more than six months longer on average than they were in 2009. Based on data from Experian, the increase in average length to maturity is driven primarily by an increasing concentration of borrowers taking out loans requiring 61 to 72 months of maturity.55

In the fourth quarter of 2017, just 6.5% of all new vehicle loans had payoff terms of 48 months or less, and 31% of all loans had payoff periods of more than six years.56 Among used car loans, 16.5% of loans had payoff periods less than 48 months. Even more loans (17.5% of all used vehicle loans), had payoff periods longer than six years.57

Source: Federal Reserve Bank of St. Louis.58

Auto loan delinquency rates

Despite a trend toward more prime lending, we’ve seen deterioration in the rates and volume of severe delinquency. In the first quarter of 2017, $8.27 billion in auto loans fell into severe delinquency.59 This is near an all-time high.

Source: Federal Reserve Bank of New York and Equifax Consumer Credit Panel.60

Overall, 4.05% of all auto loans are severely delinquent. Delinquent loans have been on the rise since 2014, and the overall rate of delinquent loans is well above the pre-recession average of 2.3%.

Source: Federal Reserve Bank of New York/Equifax Consumer Credit Panel.61

Between 2007 and 2010, auto delinquency rates rose sharply, which led to a dramatic decline in overall auto lending. So far, the slow increase in auto delinquency between 2014 and the present has not been associated with a collapse in auto lending. In fact, the total outstanding balance is up 40% to $1.22 billion since 2014.62

However, the increase in auto delinquency means lenders may continue to tighten lending to subprime borrowers. Borrowers with subprime credit should make an effort to clean up their credit as much as possible before attempting to take out an auto loan. This is the best way to guarantee lower interest rates on auto loans.

Sources

  1. Quarterly Report on Household Debt and Credit February 2018.” Total Debt Balance and Its Composition: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed Feb. 20, 2018.
  2. Quarterly Report on Household Debt and Credit February 2018.” Transition into serious delinquency (90+ days): Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed Feb. 20, 2018.
  3. State of the Automotive Finance Market,” New Car Average Rates – Page 26, from Experian. Accessed March 3, 2018.
  4. Board of Governors of the Federal Reserve System (U.S.), Average Maturity of New Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVENMNM], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTCTLVENMNM, October 2017. Accessed Feb. 21, 2018
  5. Quarterly Report on Household Debt and Credit February 2018.” Credit Score at Origination: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed Feb. 21, 2018.
  6. State of the Automotive Finance Market,” Percentage of Vehicles with Financing – Page 12, from Experian. Accessed March 3, 2018.
  7. State of the Automotive Finance Market,” Percentage of Vehicles with Financing – Page 26, from Experian.™ Accessed March 3, 2018.
  8. State of the Automotive Finance Market,” Avg New Rates – Page 26, from Experian.TM Accessed March 3, 2018.
  9. State of the Automotive Finance Market,” All Used Rates – Page 26, from Experian.TM Accessed March 3, 2018.
  10. “Board of Governors of the Federal Reserve System (US), Average Amount Financed for New Car Loans at Finance Companies [DTCTLVENANM], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTCTLVENANM, Oct. 2, 2017.
  11. “Board of Governors of the Federal Reserve System (US), Average Amount Financed for Used Car Loans at Finance Companies [DTCTLVEUANQ], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTCTLVEUANQ, Oct. 2, 2017.
  12. Quarterly Report on Household Debt and Credit February 2018.” Auto Loan Originations by Credit Score, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed Feb. 21, 2018.
  13. “Calculated metric: “State of the Automotive Finance Market” Loan Balance Risk Distribution Q4 2017 – Page 5, from Experian,TM and “Quarterly Report on Household Debt and Credit February 2018.” Total Debt Balance and Its Composition: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed March 3, 2018

    (3.77% of All Loans Are Deep Subprime + 16.11% of All Loans Are Subprime) X ($1.221 trillion in Auto Loans)

  14. U.S. Auto Loan ABS Tracker: Full-Year 2017 And December 2017 Performance,” from S&P Global Ratings. Accessed March 3, 2018.
  15. State of the Automotive Finance Market,” New Car Subprime Average Rates, Page 26, from Experian.TM Accessed March 3, 2018
  16. State of the Automotive Finance Market,” Used Car Subprime Average Rates, Page 26, from Experian.TM Accessed March 3, 2018.
  17. State of the Automotive Finance Market,” Average Loan Amounts By Tier, Page 20, from Experian.TM Accessed March 3, 2018.
  18. State of the Automotive Finance Market,” Average Loan Amounts By Tier, Page 20, from Experian.TM Accessed March 3, 2018.
  19. State of the Automotive Finance Market,” % Leasing By Tier, Page 20, from Experian.™ Accessed March 3, 2018.
  20. “Calculated metric: “State of the Automotive Finance Market” Loan Balance Risk Distribution Q4 2017 – Page 5, from Experian,TM and “Quarterly Report on Household Debt and Credit February 2018.” Total Debt Balance and Its Composition: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed March 3, 2018.

    (42% of All Loans Are Prime + 19.17% of All Loans Are Super Prime) X ($1.221 trillion in Auto Loans)

  21. U.S. Auto Loan ABS Tracker: Full-Year 2017 And December 2017 Performance,” from S&P Global Ratings. Accessed March 3, 2018.
  22. State of the Automotive Finance Market,” Average Interest Rate Prime Rating (New Car), Page 26, from Experian.TM Accessed March 3, 2018.
  23. State of the Automotive Finance Market,” Average Interest Rate Prime Rating (Used Car), Page 26, from Experian.TM Accessed March 3, 2018.
  24. State of the Automotive Finance Market,” Average Loan Amounts By Tier, Page 20, from Experian.™ Accessed March 3, 2018.
  25. State of the Automotive Finance Market,” Average Loan Amounts By Tier, Page 20, from Experian.™ Accessed March 3, 2018.
  26. State of the Automotive Finance Market,” % Leasing By Tier, Page 17, from Experian.™ Accessed March 3, 2018.
  27. Graph 1 – Auto Loan Interest Rates, data compiled from historic Experian State of Automotive Finance Reports. Accessed Feb. 21, 2018.
  28. Graph 2 – Average New Vehicle Interest Rates, data compiled from historic Experian State of Automotive Finance Reports. Accessed Feb. 21, 2018.
  29. State of the Automotive Finance Market,” Average Interest Rate Prime Rating (New Car), Page 26, from Experian.TM Accessed March 3, 2018.
  30. State of the Automotive Finance Market,” New Loan Risk Distribution, Page 16, from Experian.™ Accessed March 3, 2018.
  31. Graph 3 – % of New Car Loans Issued to Subprime Borrowers, data compiled from historic Experian State of the Automotive Finance Market reports.
  32. Average Interest Rate by Credit Score, data compiled from historic Experian State of Automotive Finance reports.
  33. Graph 4 – Average Interest Rate by Credit Score (New Car Loans), data compiled from historic Experian State of Automotive Finance reports.
  34. Calculated metric: Total Interest over the Life an Auto Loan (New Car).
    1. Board of Governors of the Federal Reserve System (U.S.), Average Amount Financed for New Car Loans at Finance Companies [DTCTLVENANM], retrieved from FRED, Federal Reserve Bank of St. Louis;
    2. Board of Governors of the Federal Reserve System (U.S.), Average Maturity of New Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVENMNM], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTCTLVENMNM, Accessed Feb. 21, 2018.
    3. Average New Car Interest Rate, data compiled from historic Experian State of Automotive Finance reports.

    Calculated Total Interest is Amortized Interest as a function of Average Amount Financed,a Average Interest Rate on New Cars,c and Average Length to Maturity of new car loans.b

  35. Graph 5 – Estimated Interest on New Car Loan.
    1. Board of Governors of the Federal Reserve System (U.S.), Average Amount Financed for New Car Loans at Finance Companies [DTCTLVENANM], retrieved from FRED, Federal Reserve Bank of St. Louis;
      https://fred.stlouisfed.org/series/DTCTLVENANM, Accessed Feb. 21, 2018.
    2. Board of Governors of the Federal Reserve System (US), Average Maturity of New Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVENMNM], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTCTLVENMNM, Accessed Feb. 21, 2018.
    3. Average New Car Interest Rate, data compiled from historic Experian State of Automotive Finance reports.

    Calculated Total Interest is Amortized Interest as a function of Average Amount Financed,a Average Interest Rate on New Cars,c and Average Length to Maturity of new car loans.b

  36. “Board of Governors of the Federal Reserve System (U.S.), Average Maturity of New Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVENMNM], retrieved from FRED, Federal Reserve Bank of St. Louis;
    https://fred.stlouisfed.org/series/DTCTLVENMNM, Accessed Feb. 21, 2018.
  37. Board of Governors of the Federal Reserve System (U.S.), Average Amount Financed for New Car Loans at Finance Companies [DTCTLVENANM], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTCTLVENANM, Accessed Feb. 21, 2018.
  38. Graph 6 – Average Used Vehicle Interest Rates, data compiled from historic Experian State of Automotive Finance reports.
  39. State of the Automotive Finance Market,” Used Car Loan Risk Distribution, Page 16, from Experian.TM Accessed March 3, 2018.
  40. “Graph 7 – Lending By Credit Score Q4 2016 vs. Q4 2017 “State of the Automotive Finance Market,” Used Car Loan Risk Distribution, Page 16, from Experian.TM Accessed March 3, 2018.
  41. State of the Automotive Finance Market,” Average Loan Rates By Credit Tier (Used Cars), Page 26, from Experian.™ Accessed March 3, 2018.
  42. Graph 8 – Average Interest Rate by Credit Score (Used Car Loans), data compiled from historic Experian State of Automotive Finance reports.
  43. Board of Governors of the Federal Reserve System (US), Average Maturity of Used Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVEUMNQ], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTCTLVEUMNQ, Feb. 26, 2018
  44. Graph 9 – Calculated metric: Estimated Interest on Used Car Loans.
    1. Board of Governors of the Federal Reserve System (U.S.), Average Amount Financed for Used Car Loans at Finance Companies [DTCTLVEUANQ], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DTCTLVEUANQ, Feb. 26, 2018
    2. Board of Governors of the Federal Reserve System (US), Average Maturity of Used Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVEUMNQ], retrieved from FRED, Federal Reserve Bank of St. Louis;
      https://fred.stlouisfed.org/series/DTCTLVEUMNQ, Feb. 26, 2018
    3. Average Used Car Interest Rate, data compiled from historic Experian State of Automotive Finance reports.

    Calculated Total Interest is Amortized Interest as a function of Average Amount Financed,a Average Interest Rate on New Cars,c and Average Length to Maturity of new car loans.b

  45. Quarterly Report on Household Debt and Credit February 2018.” Credit Score at Origination: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed Feb. 26, 2018.
  46. Graph 10 – Credit Score at Auto Loan Origination “Quarterly Report on Household Debt and Credit February 2018.” Credit Score at Origination: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed Feb. 26, 2018.
  47. Graph 11 – % of New Loans Issued to Subprime Borrowers. Calculated metric from “Quarterly Report on Household Debt and Credit August 2017.” Auto Loan Originations by Credit Score ((<620+620-659)/Total Lending), from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed Sept. 7, 2017.
  48. Graph 12 – Auto Loan Origination by Credit Tier “Quarterly Report on Household Debt and Credit August 2017.” Auto Loan Originations by Credit Score, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 17, 2017.
  49. U.S. Auto Loan ABS Tracker: Full-Year 2017 And December 2017 Performance,” from S&P Global Ratings. Accessed Feb. 26, 2018.
  50. Graph 13 – Average LTV at Auto Loan Origination “U.S. Auto Loan ABS Tracker: Full-Year 2017 And December 2017 Performance,” from S&P Global Ratings. Accessed Feb. 26, 2018.
  51. Understanding automotive loan charge-off patterns can help mitigate lender risk,” from Experian.TM Accessed Feb. 26, 2018.
  52. State of the Automotive Finance Market Q4 2010,” Pages 25-26, from Experian.TM
  53. Board of Governors of the Federal Reserve System (U.S.), Average Maturity of New Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVENMNM], retrieved from FRED, Federal Reserve Bank of St. Louis;
    https://fred.stlouisfed.org/series/DTCTLVENMNM, February 26, 2018.
  54. “Board of Governors of the Federal Reserve System (US), Average Maturity of Used Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVEUMNQ], retrieved from FRED, Federal Reserve Bank of St. Louis;
    https://fred.stlouisfed.org/series/DTCTLVEUMNQ, February 26, 2018.
  55. State of the Automotive Finance Market,” Percentage of new loans by Term, Page 23, from Experian.™Accessed February 26, 2018.
  56. Calculated metric: “State of the Automotive Finance Market,” Percentage of new loans by Term, Page 22, from Experian.™ Accessed March 3, 2018.
  57. “Calculated metric: “State of the Automotive Finance Market,” Percentage of new loans by Term, Page 22, from Experian.TM Accessed March 3, 2018.
  58. Graph 14 – Average Auto Loan Length to Maturity (Months).
    1. Board of Governors of the Federal Reserve System (US), Average Maturity of New Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVENMNM], retrieved from FRED, Federal Reserve Bank of St. Louis;
      https://fred.stlouisfed.org/series/DTCTLVENMNM, Accessed February 26, 2018.
    2. Board of Governors of the Federal Reserve System (US), Average Maturity of Used Car Loans at Finance Companies, Amount of Finance Weighted [DTCTLVEUMNQ], retrieved from FRED, Federal Reserve Bank of St. Louis;
      https://fred.stlouisfed.org/series/DTCTLVEUMNQ, Accessed February 26, 2018.
  59. Graph 15 – New Severely Delinquent Auto Loans (90+ Days) “Quarterly Report on Household Debt and Credit August 2017.” Transition into serious delinquency (90+ days): Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed September 7, 2017.
  60. Quarterly Report on Household Debt and Credit February 2018.” Total Debt Balance and Its Composition: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed February 26, 2018. (Q1 2014 compared to Q4 2017.)
  61. Graph 16 – % of All Loans Severely Delinquent “Quarterly Report on Household Debt and Credit February 2018.” % of Balance 90+ Days Delinquent: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed February 26, 2018.
  62. Quarterly Report on Household Debt and Credit February 2018.” Total Debt Balance and Its Composition: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed February 26, 2018.

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Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah here

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Auto Loan

Chase Auto Loan Review

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Chase auto loan review
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Going into a dealership without knowing what auto loan you qualify for can be a dangerous adventure for your wallet. It’s best to have a couple auto loan preapprovals in your back pocket so the dealership can’t take advantage by charging you a higher APR. To help you research which lenders offer best rates, we did some work for you. Here, we’ll review auto loans by JPMorgan Chase & Co: the company, its rates, its pros and cons, how to apply and who may be a best fit.

About Chase

The largest bank in the U.S. with more than $2 trillion in assets, Chase offers everything from mortgages to credit cards.

Chase offers auto loans in all 50 states and D.C. with terms from 36 to 72 months. It also offers the car-buying service TrueCar at no extra charge. This service lets you see what others have paid for the same or similar cars, and has a network of TrueCar-certified dealers which compete for your business with clearly posted car prices.

Chase financing: At a glance

A Chase auto loan could be an option for you, whether you’re looking at a new or used car from a dealership. The bank may also refinance your existing auto loan or help you buy your car at the end of its lease period.

Though Chase declined to share its APR range, “Chase Auto offers competitive rates based on [a] customer’s credit history and the structure of the loan,” said Shannon O’Reilly, a communications executive with Chase, specializing in auto finance. You may be able to get an idea for what rate you might receive by using Chase’s Auto Loan Calculator.

Chase loan rate example

We used the Auto Loan Calculator to compare APRs for a new 2018 Honda in Michigan.

Credit scoreAPRMonthly payment
Excellent4.49%$365
Very good5.04%$371
Good6.84%$390
Fair15.09%$487
APR and monthly payment are for a 72-month loan of $23,000. Rates vary by location. Rates as of 1/7/19.

Are you an existing Chase customer? Chase offers a 0.25% rate discount for Chase checking customers interested in refinancing an existing auto loan. To qualify, you’ll need to have a Chase checking account before you apply for a Chase auto loan, and elect to have your monthly car payment automatically deducted from your Chase account.

A closer look at Chase auto loans

Here are the strengths and weakness we found looking at Chase auto loans. Be sure to compare any auto loan offers you may get from Chase with offers from other lenders.

Highlights of Chase auto loans

  • Credit decisions are usually made within three hours; three days is the maximum time to receive a decision.
  • There is no application fee.
  • Chase ranks in the top half of JD Power’s 2018 U.S. Consumer Financing Satisfaction Study for auto loans.

Lowlights of Chase auto loans

  • Chase doesn’t offer coupon books for you to keep track of your payments.
  • You may not be able to get a loan with Chase if you have poor credit.
  • Chase doesn’t offer auto loans for cars bought in private sales.

How to apply for a Chase auto loan

To apply, you’ll need to go to Chase’s website, call Chase or go in person to a Chase branch.

Whichever way you decide to apply, you’ll have to provide your personal information (e.g. name, date of birth, address, phone number, email, Social Security number), employment and income, the car you want, the loan amount and loan term you want.

You could apply by yourself or with a co-applicant. And if you need to change the car, loan amount or loan term once you’ve begun the application process, you could simply call Chase. Still, keep in mind that any changes you make could result in changes to your APR and other facets of the auto loan offer.

The fine print

To qualify for a Chase auto loan, you need to be at least 18 years old (in Alabama, 18-year-olds have to meet specific state requirements). Chase doesn’t finance all makes and models of cars: some lenders are reluctant to finance a car that is older than 10 years, has more than 100,000 miles or has a salvage title; Chase says it reviews any unique circumstances on a case-by-case basis.

Any offer Chase provides is good for 30 days. If you decide after 30 days that you would like to get an auto loan through Chase, you’ll need to apply again.

Who is Chase best for?

Chase loans are best for existing Chase customers. If you aren’t already a Chase customer, you may be able to quickly become one and receive the 0.25% rate discount on your auto loan. The convenience of having everything in one account, especially if you’re already a Chase customer, is alluring.

It also doesn’t hurt your credit to apply to multiple lenders within a 14-day window anymore than it would to apply to one lender — plus, shopping around for a car loan is one of the smartest things you can do.

So, if you think Chase may be a good fit for you, apply to Chase and compare the offer you may get with responses from other lenders. Potential lenders include your bank, credit union and online lender. And at LendingTree you could fill out an online form and receive up to five potential auto loan offers. LendingTree is the parent company of MagnifyMoney.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at [email protected]

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Auto Loan

RV Buying Tips: Get the RV of Your Dreams

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

RV buying tips
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Ever dream of buying an RV? You’re not alone — about 10 million households in the United States already own an RV.“The popularity of RVing is at an all-time high because of the freedom and flexibility RVs offer,” said Kevin Broom, director of media relations at the RV Industry Association (RVIA). “With the same RV, people can take an array of trips, spend time having adventures with friends and family and form memories that will last a lifetime.”

When shopping for a unit, you’ll need to consider what type of RV suits your needs, how much time you plan to spend in the RV, whether you want to buy a new or used unit (or lease an RV) and how you plan to pay for it. This article will explain the costs of owning an RV, as well as how you can get your best price.

The costs of an RV

RVs have a huge range of prices, which vary depending on size, style and other factors, said Broom. As of the date of publishing, here are some estimates for a variety of new RVs, according to the RVIA:

  • Folding camping trailers: $6,000 to $22,000
  • Truck campers: $6,000 to $55,000
  • Conventional travel trailers: $8,000 to $95,000
  • Fifth wheel trailers: $18,000 to $160,000
  • Type B and C motorhomes: $60,000 to $150,000
  • Type A motorhomes: $60,000 to $500,0000

You may be able to save some money by opting for a pre-owned RV instead of a new one, added Julie Bennett, who, along with her husband Marc Bennett, authored the book “Living the RV Life: Your Ultimate Guide to Life on the Road,” and run the RV Success School.

“We have met people who spent less than $5,000 on their RV, and others who spent over $1 million,” said Marc Bennett. “Most of the people we have met that do extended travel in their RVs typically spend between $50,000 and $150,000 on their RV setup, which includes the cost of the truck and trailer, or a motorhome plus the vehicle that they tow.”

You generally don’t need a special license to drive or tow an RV, said Broom, but it’s not a bad idea to look into the laws in your state, especially if you’re buying a very large trailer or motorhome.

The RV, as well as the truck and trailer if the RV needs to be towed, is just one of the costs to consider. You’ll also need to budget for maintenance and repairs, taxes, insurance, vehicle registration, fuel and storage. These expenses can vary from state to state.

There are also an array of optional (though potentially desirable) add-ons, like roadside assistance and extended warranties, that can increase the bottom-line costs of RV ownership.

“RV dealers will try to upsell you on things like paint protection and other options you may not really need,” said Marc Bennett. “You’d be surprised how much all of this can add up, so do your homework in advance and know what you are getting yourself into before committing.”

What kind of RV should you buy?

One of the first things to consider when figuring out which type of RV you should buy is how often you intend to use it.

“If you only plan on RVing a few weeks a year for short vacations, it really doesn’t make sense to spend a whole lot,” said Julie Bennett. “If you’re planning on using your RV for extended travel or even live in it full-time, then it’s easier to justify a bigger investment.”

Here are some other questions you should ask yourself when shopping for an RV:

  • Who will be traveling in the RV? A couple of retirees who are OK roughing it on the road might opt for a travel trailer, while a large family with pets may be better off with a camper van or motorhome.
  • Where do you plan to take the RV? Julie Bennett suggests that potential RV owners think about whether they want to stay in campgrounds with hookups for electricity, water and sewage, or camp off-grid in more remote places, and find an RV that fits those needs.
  • Do you need a special license for the RV? Large trailers or motorhomes may require a special license in certain states, said Broom.
  • What “toys” are you bringing in your RV? You may need to splurge on a larger RV or motorhome if you plan to take bikes, ATVs, kayaks and other recreational gear on your adventures.
  • Does the RV have a floor plan and layout that makes sense for you? “Pay attention to the things you will use most often,” advised Julie Bennett. “Is there sufficient counter space in the kitchen for making meals? Can you fit inside the shower and wash your hair?”
  • How far will you take the RV? If you want to keep costs in check on long-haul trips, you might need to pay more attention to things like the weight and aerodynamics of the RV. You should also consider whether you want a diesel or a gas engine. Gas engines generally don’t get as much power or as efficient mileage as their diesel counterparts, but they tend to be less expensive.

Should you buy a new or used RV?

Every future RV owner is faced with one big question: Should you buy a new or a used RV? Here are some pros and cons to consider.

Pros and cons of buying a new RV

Pros

  • You know the history of the RV. Buying a new RV means you don’t have to worry that a previous owner cut corners on care and maintenance.
  • You can personalize the RV. “Some may like that they can choose their floor plan, layout, decor, color scheme and options, and some may want the latest technologies,” said Marc Bennett.
  • You can avoid potential allergens. Does your child have a severe peanut allergy? There’s no guarantee a used RV doesn’t contain peanut residue from a previous owner, so you might be safer buying a new one.

Cons

  • You’ll probably pay more. “Not only will you pay more for new, you will also see the sharpest dip in depreciation as soon as you drive it off the lot,” said Marc Bennett.
  • You still may need to make repairs. Just because you’re buying a new RV doesn’t mean it will be trouble-free. “RVs are very complex, and built by hand in relatively low-tech facilities,” he added. “Once new RVs leave the dealer’s lot, they tend to need more repairs and fixes — much like a punch list on a new house build.”

Pros and cons of buying a used RV

Pros

  • You’ll probably save money. The older an RV is, the more of an effect depreciation will have on its price tag, said Julie Bennett.
  • It’s already broken in. The problems associated with a brand new RV may have already been taken care of by a previous owner, which could save you time and money on repairs.
  • It might come with extras. People often include extra items when selling their RVs, said Julie Bennett. You may luck out with an upgraded suspension, RV gadgets or kitchenware at no additional cost.

Cons

  • It comes with risks. If the previous owner didn’t maintain an RV properly, it may need new parts or repairs.
  • You may need to renovate it. If an RV’s aesthetics are dated or simply unappealing, it’s on you to fix it up.
  • It probably won’t have a factory warranty. You may need to shell out for repairs right away before you can drive the RV, said Julie Bennett.

Where can you buy an RV?

There are a variety of places to buy an RV — and according to Marc Bennett, you may need to travel far to find the right one at the right price: “We traveled thousands of miles when buying our first RV. Opening up geographically allows for much more selection,” he said.

Here are some of the places you can start your search for an RV:

  • New RV dealerships: Looking to buy a new RV right off the lot? Then shopping at a new RV dealership might make the most sense. “Buying from a respected dealership might provide some peace of mind that they have checked the unit and it is ready to go,” said Marc Bennett.
  • Used RV dealerships: Used RV dealers might not know as much about the history of a particular unit as its original owner. However, you may be able to purchase an extended warranty for some added protection.
  • RV shows: RV shows offer the opportunity to see a wide variety of models in one place. Should you find the unit of your dreams at an RV show, you may be able to score special discounts.
  • Private sales: Buying a used RV directly from its owner allows you to learn more about its history, maintenance and unique quirks, said Marc Bennett. “An owner will be able to share much more detailed information about the specific RV than a dealership,” he added.
  • Online marketplace: Do you already know exactly what you’re looking for in an RV? An online marketplace could help you find it quickly. RVTrader.com and Craigslist are popular places to find private RV sales online, said Broom.

How do you get your best price on an RV?

The price tag on an RV can give you serious sticker shock. Luckily, there’s lots of room for negotiation, and you should not plan to pay the asking price, noted Marc Bennett.

“There’s no hard and fast rule about how much discount you can get on an MSRP [manufacturer suggested retail price],” he said, “but it is not uncommon to buy a new RV for 15% to 30% off the MSRP.”

Going into the negotiation armed with knowledge can help you get your best price on RV, added Julie Bennett.

“Get a few price comparisons on the RV you want to buy,” she said. “Know what questions to ask, know [what’s] a fair price for the RV you want, and keep an eye out for deals at certain times of year,” also noting that you may be able to get the best price when a dealer is clearing out old models to make room for new units.

If you can’t afford to pay cash, you may be able to take out an RV loan or secure other financing to make the purchase. Here are some ways to finance your RV:

  • Dealership financing: Dealerships may offer financing through lending partners (such as a bank or credit union), or offer in-house financing. This is convenient, as you can get your RV and your loan all in one place. However, dealers may use this type of financing to bolster their bottom line, so if the rate offered isn’t competitive, you might find a better offer somewhere else. Additionally, dealership in-house financing, which is usually offered to people struggling to find financing elsewhere, can carry high interest rates.
  • Banks, online lenders and credit unions: You may be able to secure an RV loan from an online lender, credit union, bank or other financial institution. Since dealers may not have partnerships with lenders you’re interested in, you may need to seek out quotes directly from the institutions themselves. Make sure to shop around to compare offers. Though credit unions may have lower rates, you’ll need to become a member.
  • HELOC or home equity loans: You may be able to use a home equity line of credit (HELOC) or a home equity loan to secure the funds for an RV. With both of these options, you’re borrowing a portion of your home equity. Keep in mind that you’re putting your home on the line with this type of financing, so make sure you’re on firm financial footing before moving forward. However, because the loan is backed by collateral, interest rates tend to be lower. With either option you’ll also need to pay closing costs, a process that can take several weeks or longer.

The bottom line

RVs offer the freedom to travel the country on your terms. Whether you dream of a life on the road or you’re just looking to spend a couple of weeks in the great outdoors every summer, you can get an RV to make it happen.

Remember: There’s no one-size-fits-all solution to finding or financing the RV of your dreams. Do your homework, know what you’re looking for and don’t be afraid to walk away from a bad deal. The right RV is out there waiting for you — and with enough legwork, you’ll find it.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Joni Sweet
Joni Sweet |

Joni Sweet is a writer at MagnifyMoney. You can email Joni here