Market Trends of US Auto Loan Industry
Rising Price of Automobiles
Prices of automobiles in the United States are observing a continuous increase, resulting in an increasing number of vehicle buyers opting for loans and financing instruments. The inflation rate on automobiles exists at a higher rate in comparison to the inflation on all goods and services. A larger number of manufacturers in the country are operating at a lower-than-optimal capacity production level, and rising semiconductor prices combined with the surge in demand from the buyer's side are resulting in demand-pull inflation and building the market in favor of automobile loan providers. The price of new vehicles is observing a y-o-y growth of around 4.5%, with the average price of used vehicles surging more than 30% from the pre-pandemic level. To control this inflation, the United States Fed is making a continuous rise in its rate of interest, simultaneously resulting in the rising interest rate of auto loans and risk premiums by the banks in it. This cycle effect of rising automobile prices and interest rates is creating an increase in interest revenue for Automobile loan providers in the country.
Rising Sales of Light Trucks
Among the vehicle sales by type in the United States, light trucks exist with the highest share. This is leading to a large number of banks, financial companies, and other lending platforms focusing on light trucks-specific loan and finance products. Wyoming, Montana, Idaho, South Dakota, and Alaska have emerged as the states leading in the share of light trucks, resulting in auto loan providers expanding their businesses over different states as per the rising sales data to reap the market benefit. In terms of sales, Texas has emerged as the state leading in sales of light trucks. Toyota and Ford are among the existing companies manufacturing light trucks in the United States and observed higher sales in comparison to cars, creating a positive market for loans and financing of light trucks by lenders. More than 9 million new light trucks were sold in the country last year, existing at a significantly higher level than passenger cars, a significant segment of automobile loans in the country.
