As common knowledge suggests, there is a difference between the price of a used car and a new car. However, there is an unexpected gap between loans required on average for a new vehicle versus average loans needed for a used car.
There is a difference of $11,292 between the prices of the two. This means you will have to borrow 11 more grands. The suggested cause of this major increase is the rise in car prices. This increase in cost has forced people to adopt for alternative options to survive with their monthly budget. Some people have elongated their loan terms, while others have chosen to but used cars instead of new ones.
As of the end of 2016, new car loan terms extended up to 68 months which makes around 5 and a half years. This period is only 36 months for a used vehicle. The lease payment for new cars was up to $506 last year whereas it was $364 for used vehicle. This shows that there is a large gap between the two. There are high expectations that a lot of borrowers will extend their loan payment period.
In the fourth quarter of last year, more than one-third of the people who took loans signed for loan payment period of up to 6 years or longer. There is only a small percentage of people who will pay the loans within five year time which is the actual period. This number has dropped to 18.7% of the loans. 2.44 percent of the people getting loans had 30-day delinquencies whereas 0.78 percent had 60-day delinquencies on paying their loan payment.
Zabritski, the senior director at Experian, still has a positive outlook and says that the lending market is still healthy.