US auto loan interest rates rose slightly in May and June 2024. However, the period of steep interest rate increases appears to be over. In the US, interest rates on 5-year car loans fell from 2019 to December 2021, reaching a low of 3.85%. However, interest rates have risen sharply in the following years, reaching 7.9% in February 2024. The average size of new car loans and leases in the US has risen in recent years, further increasing the burden on borrowers.
How many cars are financed in America?
Auto loans exist because not everyone who wants or needs a car can buy one directly. Financial institutions lend customers money to buy a car, but those funds must be paid back with interest. Most new cars purchased in the United States in 2023 were purchased with an auto loan. Using an auto loan to buy a used car is less common than buying a new car, but more than one-third of used cars are purchased with a loan.
The US Auto Industry
The auto loan business is huge in the United States due to high sales of both new and used cars. Many parts of the United States are car-centric and outside of major cities, it is often difficult to use other modes of transportation for daily commutes. In fact, only a small percentage of US workers use public transportation to get to work. This has helped establish the importance of the automotive sector in North America. Nevertheless, there are still countries in Asia Pacific, Africa, the Middle East and Europe that have higher car ownership rates than the United States.