Purchasing a vehicle, whether new or used, is a significant financial decision for many. Unless you’re paying cash upfront, auto financing will be a crucial part of the process. In the second quarter of 2024, a substantial majority of car buyers – 80.11% for new cars and 35.84% for used cars – opted for financing to drive their chosen vehicle home. If you’re considering joining their ranks, understanding the landscape of car payments is essential for effective budgeting and financial planning.
So, what can you anticipate your monthly car payment to be in 2024? As of Q2 2024, the average monthly car payment in the U.S. stood at $734 for new vehicles and $525 for used vehicles. However, this is just an average. Your actual payment can vary significantly based on a variety of factors. These include your creditworthiness, the size of your down payment, the loan term you select, and other elements. This article delves into Experian’s Q2 2024 State of the Automotive Finance Market report to dissect the elements influencing your monthly car payment and provide a comprehensive overview of auto loan dynamics in 2024.
| Auto Loan Averages by Category |
|---|
| Category |
| Monthly payment |
| Loan amount |
| Interest rate |
| Loan term |
| Credit score |
Source: Experian data as of Q2 2024; VantageScore® 4.0 used
Key Factors Influencing Your Car Payment
While knowing the average car payment for 2024 provides a benchmark, it’s crucial to recognize that your individual payment will be unique. Several key variables come into play when determining your monthly car payment:
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Loan Amount: The principal amount you borrow is a primary driver of your payment. Naturally, a larger loan translates to higher monthly payments, as you have more capital to repay. To minimize your loan amount, consider opting for a less expensive vehicle or increasing your down payment. A substantial down payment reduces the amount you need to finance, directly impacting your monthly outlay.
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Interest Rate: The interest rate attached to your auto loan significantly affects your monthly payment. Loans with higher interest rates will result in larger monthly payments compared to those with lower rates, even for the same loan amount and term. Improving your credit profile is key to securing lower interest rates. This can be achieved by consistently paying bills on time, resolving any past-due accounts, managing your overall debt, and applying for credit judiciously. A stronger credit history signals lower risk to lenders, qualifying you for more favorable rates.
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Loan Term: The duration of your loan, or loan term, has a direct impact on both your monthly payment and the total interest paid over the loan’s life. Shorter loan terms typically mean higher monthly payments, but you’ll pay significantly less interest in total. Conversely, longer loan terms reduce your monthly payments, making them more budget-friendly in the short term, but you’ll end up paying considerably more interest over the extended repayment period. The choice between short and long-term loans involves balancing immediate affordability with long-term cost.
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Credit Score: Your credit score is a critical determinant of the interest rate a lender will offer you. Borrowers with excellent credit scores are viewed as less risky and are therefore eligible for the most competitive, lowest interest rates. This translates directly to lower monthly payments. For example, a $30,000 loan over 48 months could have a significantly different monthly payment depending on the interest rate. At a 7% interest rate, the monthly payment would be approximately $718.39. However, if the interest rate increases to 10% due to a lower credit score, the monthly payment jumps to around $760.88 for the same loan amount and term. This difference highlights the financial advantage of maintaining a good credit score.
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Down Payment: The amount of your down payment directly impacts your monthly car payment. A larger down payment reduces the loan amount you need, which in turn lowers your monthly payments. Saving up for a more substantial down payment is a proactive step towards making your car payments more manageable.
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Vehicle Add-ons: When purchasing a vehicle, dealerships often offer various add-ons such as gap insurance or extended warranties. While these might seem appealing, incorporating their costs into your auto loan will increase your monthly payments. Carefully evaluate the necessity of these add-ons. Declining coverage you don’t truly need can lead to significant savings and keep your monthly payments lower.
Average Car Payment Based on Credit Score
Experian’s data from Q2 2024 reveals a nuanced picture of average car payments when categorized by credit score ranges. While the overall average new car payment was $734 and the used car payment averaged $525, these figures fluctuate based on borrower creditworthiness. Interestingly, despite used car loans typically carrying higher interest rates, used car buyers generally experienced lower monthly payments across all credit score categories compared to new car buyers with similar credit profiles. This is primarily because used car loans are typically for smaller amounts.
The data shows that “near prime” borrowers financing new cars faced the highest average monthly payments at $765. Conversely, “prime” borrowers opting for used car loans enjoyed the lowest average payments at $518 per month. Notably, “super prime” and “deep subprime” borrowers financing new cars had surprisingly similar average monthly payments. This seemingly counterintuitive outcome arises because while deep subprime borrowers face interest rates that can be three times higher than those offered to super prime borrowers, they also tend to borrow significantly smaller loan amounts, resulting in comparable monthly payment figures.
| Average Auto Loan Payment by Credit Score |
|---|
| Credit Score Range |
| Super prime (781 – 850) |
| Prime (661 – 780) |
| Near prime (601 – 660) |
| Subprime (501 – 600) |
| Deep subprime (300 – 500) |
Source: Experian data as of Q2 2024; VantageScore 4.0 used
Estimating Your Monthly Car Payment
While average figures offer valuable context, accurately estimating your own potential car payment requires considering your specific circumstances. While you won’t know the exact payment until you finalize your vehicle purchase and secure loan approval, you can get a reliable estimate beforehand. Utilizing an online car payment calculator is a helpful step in this process.
By inputting key variables such as the anticipated interest rate you might qualify for, the vehicle’s purchase price you’re considering, and your preferred loan term, you can use Experian’s car payment calculator to project your estimated monthly payment before you even begin actively shopping for a car loan. Experimenting with different values for these variables – adjusting the purchase price, loan term, or interest rate – allows you to understand how each factor influences your payment. This proactive approach empowers you to determine an affordable budget range and focus your vehicle search on cars that align with your financial capabilities.
Further Insights into Car Loan Trends
Beyond average payments, a broader look at car loan statistics reveals additional trends shaping the auto finance market in 2024.
Interest Rate Averages by Credit Score
Interest rates are a dynamic element of auto loans, heavily influenced by credit scores and whether the vehicle is new or used. In Q2 2024, the average interest rate for new car loans was 6.84%, while used car loans averaged significantly higher at 12.01%. These average annual percentage rates (APRs) demonstrate a clear correlation with creditworthiness.
Borrowers with the highest credit scores (“super prime”) consistently secured the lowest average interest rates, irrespective of whether they were financing a new or used vehicle. Conversely, as credit scores decreased, average interest rates climbed steadily. Deep subprime borrowers faced the highest interest rate burdens, with average rates reaching 15.77% for new car loans and a substantial 21.55% for used car loans. This stark difference underscores the significant financial advantage of having a strong credit score when seeking auto financing.
| Average Auto Loan Interest Rate by Credit Score |
|---|
| Credit Score Range |
| Super prime (781 – 850) |
| Prime (661 – 780) |
| Near prime (601 – 660) |
| Subprime (501 – 600) |
| Deep subprime (300 – 500) |
Source: Experian, data as of Q2 2024; scores calculated using VantageScore 4.0
Loan Amount Averages by Credit Score
The average amount borrowed for vehicle purchases also varies considerably, influenced by credit score and vehicle type (new vs. used). In Q2 2024, new car buyers borrowed an average of $40,927, while used car buyers financed significantly less, with average loan amounts of $26,248. This difference reflects the generally lower purchase prices of used vehicles.
Regardless of whether you’re buying new or used, minimizing your loan amount is a sound financial strategy to reduce your monthly payments. Strategies to decrease your loan amount include maximizing your down payment through savings, leveraging a trade-in or private sale of your current vehicle, or considering purchasing a less expensive car model.
| Average Auto Loan Amount by Credit Score |
|---|
| Credit Score Range |
| Super prime (781 – 850) |
| Prime (661 – 780) |
| Near prime (601 – 660) |
| Subprime (501 – 600) |
| Deep subprime (300 – 500) |
Source: Experian data as of Q2 2024; VantageScore 4.0 used
Loan Term Averages by Credit Score
Loan terms, representing the repayment period, also exhibit variations based on credit score. In Q2 2024, average loan terms for new and used car loans were relatively close, at 68.48 months and 67.41 months, respectively. However, some differences emerge when examining specific credit score segments. Deep subprime used car buyers had the shortest average loan term at 63.75 months, while near prime new car buyers had the longest at 74.13 months.
A notable disparity in loan terms exists between super prime and near prime borrowers purchasing new cars. Super prime borrowers, on average, paid off their new car loans nearly 10 months faster than near prime borrowers. This shorter repayment period translates to substantial interest savings for super prime borrowers over the life of the loan.
While longer loan terms can initially reduce your monthly payments, they lead to significantly higher overall interest costs and increase the risk of your car’s value depreciating faster than your loan balance. This situation, known as being “upside down” on your loan, means you owe more than the car is worth. Opting for a shorter loan term, although it increases your monthly payment, saves you money on interest in the long run and minimizes the risk of ending up owing more than your vehicle’s value.
| Average Auto Loan Term by Credit Score |
|---|
| Credit Score Range |
| Super prime (781 – 850) |
| Prime (661 – 780) |
| Near prime (601 – 660) |
| Subprime (501 – 600) |
| Deep subprime (300 – 500) |
Source: Experian data as of Q2 2024; VantageScore 4.0 used
Making Informed Car Payment Decisions in 2024
Understanding average car payments in 2024 provides a valuable starting point for your car buying journey. However, remember that your individual monthly payment will be shaped by your unique financial profile and choices. If minimizing your car payment is a priority, consider these strategies: selecting a more affordable vehicle, increasing your down payment, and proactively working to improve your credit score if it’s not optimal. Knowing your credit score is the first step – you can check your FICO® Score☉ for free through Experian at any time.
When you’re ready to purchase a vehicle, dedicate time to comparing financing options. Securing multiple auto loan quotes from various lenders is crucial to finding the most favorable interest rate you qualify for. To minimize any potential negative impact on your credit score from multiple credit inquiries, aim to gather all your loan quotes within a concentrated two-week timeframe. This approach allows credit scoring models to recognize rate shopping and treat multiple inquiries as a single event, reducing any adverse effects on your credit. By being informed and proactive, you can navigate the auto financing process confidently and secure a car loan with manageable monthly payments in 2024.
