Financial and Monetary Systems

Charted: The auto loan crisis of America

Americans under the age of 40 have grown their vehicle-related debt the most, with the average auto loan up 41% since 2019 at $24,000.

Americans under the age of 40 have grown their vehicle-related debt the most, with the average auto loan up 41% since 2019 at $24,000. Image: Pexels/Gustavo Fring

Marcus Lu
Financial Writer, Visual Capitalist
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  • Since the COVID-19 pandemic, Americans have taken on significantly more debt to buy vehicles.
  • This infographic visualizes data from the Federal Reserve’s most recent consumer debt update.
  • Americans under the age of 40 have grown their vehicle-related debt the most, with the average auto loan up 41% since 2019 at $24,000.
Interest rates on auto loans are typically fixed, meaning many young Americans were able to take advantage of the low rates seen during the pandemic.
Interest rates on auto loans are typically fixed, meaning many young Americans were able to take advantage of the low rates seen during the pandemic. Image: Visual Capitalist.

The growing auto loan problem facing young Americans

Since the COVID-19 pandemic, Americans have taken on significantly more debt to buy vehicles. This is especially true for Gen Z and Millennials, who the Federal Reserve believes may have borrowed beyond their means. In this infographic, we’ve visualized data from the Fed’s most recent consumer debt update.

Aggressive borrowing

The first chart in this graphic shows the growth in outstanding car loans between Q2 2020 (start of the pandemic) to Q4 2022 (latest available).

The Fed reports that the average auto loan is now $24,000, up 41% from 2019’s value of $17,000.
The Fed reports that the average auto loan is now $24,000, up 41% from 2019’s value of $17,000. Image: Visual Capitalist.

We can see that Americans under the age of 40 have grown their vehicle-related debt the most. It’s natural for Gen Z (ages 11-26) to have higher growth figures because many of them are buying their first car, but 31% is quite high relatively speaking.

Part of this can be attributed to today’s inflationary environment, which has pushed used car prices to new highs. Supply chain issues have also resulted in over 30% of new cars being sold above MSRP.

Because of these rising prices, the Fed reports that the average auto loan is now $24,000, up 41% from 2019’s value of $17,000.

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Spiking delinquencies

Interest rates on auto loans are typically fixed, meaning many young Americans were able to take advantage of the low rates seen during the pandemic.

Despite this, one in five Gen Zs say that their car payments account for over 20% of their after-tax income.

Shown in the second chart of this infographic, the amount of auto debt transitioning into serious delinquency is much higher for Gen Z and Millennials. Throughout 2022, these generations saw $20 billion in auto debt fall 90+ days behind.

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The outlook for these struggling borrowers is bleak. First there’s inflation, which has pushed up the prices of most consumer goods. This eats into their ability to make car payments.

Second is rising interest rates, which make credit card debt—another pain point for young borrowers—even more costly. Finally, there’s student loans, which are expected to resume in summer 2023. Payments on student debt have been suspended since the beginning of the COVID-19 pandemic.

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