Research

U.S. Auto Debt Grows to Record High Despite Pandemic

Though the COVID-19 pandemic decisively changed many aspects of Americans' routines, one of the most notable differences has been in mobility and the necessity to leave the house.

Pandemic lockdowns and the desire to avoid infection kept many Americans inside, causing them to reconsider how much they can get done without leaving home. With stay-at-home the new normal in 2020—and a record number of people working remotely—the nation rapidly adapted to delivery services, and many online retailers saw their businesses boom.

These changes left many wondering if and how consumer borrowing for automobiles would be impacted. The answer: Overall, the total balance of consumer auto loans still grew in 2020—to a record high of $1.37 trillion, according to Experian data.

And while auto loan debt grew at roughly the same pace as the year prior, the pandemic's effect was apparent in certain aspects of the market—particularly when focusing on who was financing cars.

As part of our ongoing review of consumer debt in the U.S., Experian reviewed credit report data to see how consumer auto debt has changed in the past year. This analysis compares annually representative data for 2019 with data from the fourth quarter (Q4) of 2020—the most recent available. Read on for our insights and analysis.

Auto Debt Climbs to Record High of $1.37 Trillion

Between 2019 and Q4 2020, overall auto debt in the U.S. grew by $80 billion to $1.37 trillion—a 6% increase, according to Experian data. That expansion mirrors the 6% average auto debt growth rate over the past decade. In other words, despite changes in consumers' daily travel and commuting habits, the automotive financing market didn't experience major disruption similar to what occurred with other types of consumer debts.

Snapshot: Overall Auto Loan Debt
2010201920202019-2020 Change
Total outstanding debt$677B$1.29T$1.37T+$80B (6%)

Source: Experian

Compared with other types of consumer debt, auto loans saw one of the more modest increases in overall balances during the past year.

Average Consumer Auto Debt Balances Grow Amid Pandemic

Along with overall debt, consumers saw little growth in their average balances, with the amount they owe increasing by $634—3%—since 2019, according to Experian data. That's just 1 percentage point more than the rate at which consumer balances grew in 2019, again reinforcing that consumer auto debt didn't undergo drastic change during the pandemic.

Snapshot: Individual Auto Loan Debt
2010201920202019-2020 Change
Avg. auto loan balance$14,973$19,231$19,865+$634 (3%)

Source: Experian

When compared with the significant changes to other debt balances—student loan balances grew by 9% between 2019 and Q3 2020 and credit card debt decreased by 14% during that time—auto debt's consistent annual growth pattern may have more complexity than appears.

"COVID-19 caused some disruptions in the market that defied ongoing trends that we had seen," says Melinda Zabritski, Experian's senior director of automotive financial solutions. "Perhaps one of the most unexpected trends was that delinquencies didn't rise significantly during the pandemic, though we know that a variety of accommodation programs, along with stimulus packages, likely helped keep them down."

As part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, the federal government suspended student loan repayment and issued guidance that directed mortgage lenders to allow forbearance for those impacted by the pandemic.

These measures aimed to offer relief to consumers in need—and while they appear to have been successful (so far), the efforts also translated to rising balances as fewer accounts are being paid down. Take for example the case of student loans, which increased by 12% due in large part to continued borrowing coupled with non-payment of existing debt.

In the case of auto debt, however, there was no clear guidance from the federal government. As a result, consumers in need of financial relief had to find it on their own by way of refinancing, selling their car or taking other action. Some had the option of negotiating with their lenders, many of which announced willingness to work with borrowers in need at the onset of the pandemic. While it's unclear how many lenders made special repayment arrangements for borrowers financially impacted by the pandemic, it's clear whatever actions they took did not change the growth pattern of auto debt.

Auto Delinquencies Dipped But Are Now on the Rise

Without sweeping policies that paused or helped to defer auto loan repayment, consumers had to either continue paying their auto debt or find other means to avoid missing payments.

While rates of most delinquency decreased sharply during the first months of the pandemic, data from Q4 2020 shows that the number of past-due accounts is creeping up again. From Q3 to Q4 of 2020, the ratio of accounts 30 to 59 days past due (DPD) increased by 12%; 60 to 89 DPD accounts rose by 18%; and 90 to 180 DPD accounts rose by 3%.

That followed the period between 2019 and Q3 2020 when consumers saw the percentage of their accounts 30 to 59 days past due drop by 26%, according to Experian data. The ratio of delinquent accounts 60 to 89 DPD also fell by 22%.

The only exception to delinquency improvement over that time period was the percentage of accounts severely behind (90 to 180 DPD), which saw an increase between 2019 and Q3 2020. Among other possible factors, this group could include people who were past due at the onset of the pandemic and were not able bring their accounts up to date during the crisis.

Though delinquencies (those in the 30 to 59 and 60 to 89 DPD ranges) for auto debt were ultimately down between 2019 and Q4 2020, the slow increase observed in the last quarter may indicate that change is coming.

Auto Loan Delinquency Rates
Delinquency Period2019Q3 2020Q4 20202019-Q4 2020 Change
% of accounts 30-59 DPD2.11%1.56%1.75%-17%
% of accounts 60-89 DPD0.65%0.51%0.60%-8%
% of accounts 90-180 DPD0.33%0.36%0.37%+12%

Source: Experian

Overall, the decline in delinquent auto accounts is positive, as payment history is the most important aspect of a consumer's credit score. So far during the pandemic, the average FICO® Score has increased, growing 7 points to a record of 710 in 2020.

Car Buyers Skew Prime During Pandemic

Overall, consumers with credit ratings in the prime and super prime ranges led new borrowing, while those in the subprime and deep subprime groups saw declines in new auto originations. The following VantageScore ranges were used to establish score groups:

  • Deep subprime: 300-500
  • Subprime: 501-600
  • Nonprime: 601-660
  • Prime: 661-780
  • Super prime: 781-850

In Q4 2020, 43% of total loan originations were attributed to prime consumers and 20% to the super prime borrower segment, an increase from 2019, according to data from Experian's Q4 2020 State of the Automotive Finance Market report. On the other end of the spectrum, subprime and deep subprime borrowers reduced their share of originations, dipping to 16% and 2%, respectively.

"Stimulus packages likely played a part in financing volumes, but with that said, subprime borrowers were probably some of the most impacted by COVID-19, and may not have been in the market for a vehicle," Zabritski says. "Overall, we saw subprime originations decline at a faster pace in 2020 than previously."

Auto Balances Increase Most Across High Credit Ranges

Broken out by FICO® Score range, it's clear that those with scores in the "good" and "very good" ranges—who are considered prime borrowers—experienced the biggest changes in auto debt. Consumers with scores between 300 and 579 saw balances increase by only 1%—significantly less than the 3% to 4% growth seen by other groups.

Change in Individual Auto Debt by Score Range
Score Range20192020Change
300-579

Very poor

$16,435$16,604+1%
580-669

Fair

$19,811$20,339+3%
670-739

Good

$21,003$21,711+3%
740-799

Very good

$19,690$20,438+4%
800-850

Exceptional

$18,011$18,410+2%

Source: Experian

Young Generations Again Drive Auto Debt Growth

Similar to what was seen across other types of debt in the past year, the youngest adult consumers were the ones who saw the greatest change in their auto debt in 2020. Generation Z—consumers ages 18 to 23 as of 2020—saw a whopping 12% increase, which is nearly six times the growth of the silent generation, who have nearly equivalent levels of auto debt.

Change in Total Auto Debt by Generation
20192020Change
Generation Z (18-23)$14,272$15,943+12%
Millennials (24-39)$18,201$19,268+6%
Generation X (40-55)$21,570$22,512+4%
Baby boomers (56-74)$18,759$19,377+3%
Silent generation (75+)$14,540$14,760+2%

Source: Experian; ages as of 2020

Consumers in All States See Increase in Auto Balances

Consumers in all 50 states and Washington, D.C., saw their average auto balance increase in 2020, according to Experian data. In the majority of states—35 to be exact—consumers saw increases that at least matched the national average growth rate of 3%. Borrowers in nearly half of states—24—saw an average growth rate of at least 4%. And as Americans overall saw modest growth in their balances, consumers in one-third of the nation saw average growth of above 5%.

The varying change seen across the states is a reminder that the pandemic has had disparate impacts, many of which are based on geography.

Average Consumer Auto Balance by State
State20192020Change
Alabama$20,822$21,655+4%
Alaska$21,876$23,158+6%
Arizona$21,054$21,945+4%
Arkansas$22,309$23,193+4%
California$19,387$19,713+2%
Colorado$20,153$20,731+3%
Connecticut$15,824$16,212+2%
Delaware$18,837$19,309+3%
District of Columbia$17,141$17,409+2%
Florida$19,384$20,110+4%
Georgia$21,222$21,696+2%
Hawaii$19,789$19,8150%
Idaho$19,885$20,937+5%
Illinois$18,340$19,036+4%
Indiana$17,971$18,698+4%
Iowa$18,901$19,864+5%
Kansas$19,177$20,181+5%
Kentucky$18,476$19,336+5%
Louisiana$23,025$23,733+3%
Maine$16,570$17,696+7%
Maryland$19,704$20,195+2%
Massachusetts$15,650$15,887+2%
Michigan$14,720$15,638+6%
Minnesota$17,082$18,049+6%
Mississippi$21,358$21,915+3%
Missouri$18,608$19,459+5%
Montana$20,046$21,135+5%
Nebraska$17,892$18,951+6%
Nevada$21,020$21,727+3%
New Hampshire$16,925$17,654+4%
New Jersey$15,941$16,286+2%
New Mexico$23,537$23,772+1%
New York$16,107$16,483+2%
North Carolina$19,815$20,121+2%
North Dakota$20,728$21,834+5%
Ohio$16,646$17,409+5%
Oklahoma$22,627$23,302+3%
Oregon$18,449$19,096+4%
Pennsylvania$16,942$17,600+4%
Rhode Island$14,940$15,485+4%
South Carolina$19,295$19,996+4%
South Dakota$18,923$19,890+5%
Tennessee$20,394$21,077+3%
Texas$24,162$24,821+3%
Utah$19,357$20,346+5%
Vermont$16,814$17,879+6%
Virginia$19,369$20,013+3%
Washington$20,103$20,649+3%
West Virginia$21,224$22,553+6%
Wisconsin$16,794$17,661+5%
Wyoming$24,446$25,522+4%

Source: Experian

Auto Leasing Slows, While Electric Vehicles' Popularity Surges

While most borrowing trends have remained relatively steady since 2019, certain areas of the automobile market are experiencing changes worth highlighting. Experian's Q4 2020 State of the Automotive Finance Market report gives a detailed overview of changes in the auto finance market. Here are the highlights from Q4 2020:

  • Consumers are leasing vehicles less often. The percentage of all new vehicles that are leased dropped to 27% in Q4 2020, down from 31% in 2019. Lease payments have ticked up for nearly all consumers, except those in the prime and super prime segments who saw lease payments decrease in 2020.
  • Electric and hybrid cars are growing in popularity. Electric and hybrid vehicles are becoming more commonplace, and their popularity spiked in 2020. Electric and hybrid vehicles now make up 7% of new financing—an increase from 4% in 2019. Toyota leads the market with the largest share (39%) of electric and hybrid vehicles, followed by Tesla (26%) in Q4 2020.
  • Loan payments are growing, despite lower interest rates. The average interest rate for an auto loan was 4.31% in Q4 2020, down from 5.25% from the same period the previous year. But even with interest rates on the decline, the average new loan amount spiked along with the average monthly payment. The average amount financed grew by nearly $2,000 to a total of $35,228 and the average monthly payment grew by $21 to $563 in Q4 2020.

"The automotive finance industry is a resilient one, and we saw that again in 2020," says Zabritski. "Despite the turbulent year, we did see automotive portfolio balances grow, which is a positive sign, though it's likely driven by the higher average loan amounts.

Credit and Debt Trends in Changing Times

Though initial data shows that auto debt is rising at a rate that's roughly the same as what's been seen in previous years, it's important to recognize that this data is a snapshot taken during a turbulent period. Additionally, much of this change occurred over a period of around a year and a half and is subject to further change as time goes on.

This analysis looks at the most recent (upon date of publication) data from Q4 2020 and compares it with an annual snapshot for 2019 and other years cited. Experian will continue to monitor changes to consumer credit trends and will provide updates in the future.

Methodology: The analysis results provided are based on an Experian-created statistically relevant aggregate sampling of our consumer credit database that may include use of the FICO® Score 8 version. Different sampling parameters may generate different findings compared with other similar analysis. Analyzed credit data did not contain personal identification information. Metro areas group counties and cities into specific geographic areas for population censuses and compilations of related statistical data.

FICO® is a registered trademark of Fair Isaac Corporation in the U.S. and other countries.