If the thought of debt unnerves you, may we suggest skipping ahead to the next article? Because this news could send you right into a panic attack.
There's no way to sugar coat it, so we're just going to come out and say it: Americans owe $1 trillion in car loans for the first time ever.
How did that happen? It seems like just yesterday, we were emerging from the Great Recession. Companies everywhere were downsizing. Thousands upon thousands of people lost their jobs. Loans were hard to get. Car sales were in the tank.
But so much has happened in the past several years, namely:
- Job growth in the U.S. has surged: Just last month, some 270,000 new jobs were added, and the jobless rate dipped to 5.0 percent, a rate not seen since 2008.
- Interest rates have plummeted: Today, a 60-month new-car loan can be had for 3.1 percent. A 60-month used-car loan runs roughly 2.58 percent. A quick search on Bankrate turned up even lower terms in our area.
As a result, the U.S. auto market is very, very strong right now, and it's on track to continue its winning streak through next year.
Also, people are paying big bucks for those rides. The average cost of a new car currently hovers north of $33,000.
So, you add all that up -- more jobs, cheaper/easier loans, pricier cars, and a boom in auto sales -- and you get $1 trillion.
SHOULD WE WORRY?
The good news is, auto loan delinquency rates are still low. Of the total amount of car loans, only about $9 billion are more than 60 days past due, which is just a fraction of one percent of the total. That's better than the delinquency rate of mortgages and even credit cards.
Granted, that doesn't mean that we won't experience another credit bubble. However, the likelihood of it bursting in the immediate future seems remote.