The drop in gas prices has caused some major changes in America. One of those changes is that there has been a surge in new car purchases. Of course, that means more debt.
The Fiscal Times reported that Experian records show Americans had outstanding auto loan debts of a record $886 billion in the 2014 Q4. Things have changed from only two years ago, an increase of 23 percent.
Compared to 2013 Q4, there were 84 percent more new vehicles bought with financing. Average loan amounts were sitting at $950 in 2013, but now they have skyrocketed to their highest levels on record at $28,381 in the fourth quarter, up more than 28 times.
The bad news is not debt, fueled by what may be a temporary improvement in the economy. The good news is that more cars are being sold, and the economy is ticking over, generating money to be spent – or saved.
The stats show that Americans bought 573,633 new cars in February alone, more than half of the 1.1 million this year, an increase of 2.8 percent over the first two months of 2014, according to Automotive News.
Businesses also got into the act. a buying spree in light-duty trucks, jumped the year-to-date total to 1.3 million, adding 683,986 in February, an increase of 15.2 over the same two months in 2014.
People have obviously forgotten what happens when gas prices rise, but they don’t seem to care. The EPA cares, though, and they are not happy.
With gas prices falling 61 percent since summer, sales of larger vehicles have been stimulated. Some would say overstimulated. SUV sales jumped 58.1 percent in January-February, compared to the same two months a year ago. Midsize SUVs also rose 31.2 percent.
The American love affair with bigger, more luxurious vehicle does not end with SUVs. People are buying both larger cars and luxury cars. The average price of a new vehicle is at an all-time high. TrueCar.com reports that the average price for new cars is $31,831 and used cars average $16,800.
Who Is Buying?
The vast majority of the new loans were subprime, so that means Americans with credit ratings under 600. They are taking this opportunity to get back into the game, and the finance companies and banks are probably very happy about that.
Americans still love pickups too. The top-selling vehicle in January-February was the Ford F-Series pickup, with sales of 109,606, following close behind was the Chevrolet Silverado pickup , with sales of 81,501 and in third place, the Dodge Ram pickup, with 59,916 units sold.
Let’s hope the prices stay down long enough for this surge to push the economy into positive territory. The funny thing is that is wasn’t US government stimulus that caused this, it was brought about by the Saudis trying to kill off the U.S. fracking industry.