Study: Average Used Car Loan Now 125% of Car’s Value

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The common borrower taking out a used automobile mortgage within the first quarter of 2023 borrowed 125% of the worth of the automobile they purchased, in response to a brand new examine.

Researchers from TransUnion and J.D. Energy write, “As automobile values have declined in current quarters, used automobile loan-to-value ratios at origination have trended within the incorrect course for customers.”

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The common loan-to-value ratio sat at 110% within the first quarter of 2022 and 104% in 2021.

The rise comes partly due to inflated used automobile costs late final yr. TransUnion Senior Vice President Satyan Service provider explains, “To a big extent, used automobile values have been elevated on account of the shortage introduced on by pandemic-related provide chain and stock points. As these points have abated, and inventories have begun to return to extra of a traditional state, the worth of these used automobiles have begun to say no.”

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That may depart debtors underwater — owing extra on a used automobile than its current market worth.

Debtors with shortly depreciating automobiles, the researchers write, are “extra more likely to go delinquent.”

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