Personal Finance News
Study Highlights States Seeing Largest Auto Loan Rate Increases
A recent study found that auto loan rates in certain states have increased by more than 2% in the last quarter.
About the results:
New data from the personal finance site WalletHub found that auto loan rates increased in all but four states between the second and third quarter of this year.
As the site notes, auto loan debt in the United States totals more than $1.6 trillion. That amounts to a per-household average of $13,000. Currently, the average interest rate for new cars is more than 8% when consumers finance with commercial banks and around 6% with other finance companies. However, in some states, the average is even higher — and has been rising.
Topping the list of states that saw the largest increases between Q2 and Q3 2024 is North Dakota. With an average auto loan rate of 9.43%, that marks a quarter-to-quarter increase of 2.34%. Similarly, the average in Utah rose 2.11% to reach 8.74%. The rest of the top five was occupied by Alaska, Rhode Island, and Hawaii.
Although those states saw the largest quarterly increases, none had the overall highest average rate. For the third quarter of 2024, Mississippi’s 12.50% average auto loan rate was the highest followed by Kentucky with 11.85%. They were followed by other Southern states including Alabama (11.84%), South Carolina (11.73%), and Arkansas (11.68%).
On the other end, Vermont saw the smallest quarterly increase as rates actually declined by 0.82% to hit 8.36%. Delaware and Connecticut also saw modest decreases while rates in Montana were flat for the quarter. Vermont also ranks second behind Massachusetts’ 8.15% in terms of the lowest average auto rate in the country.
It should be noted that, while many states saw rising auto loan interest rates at the start of Q3, the Federal Reserve rate cut near the end of the quarter as well as another possible cut on the horizon could mean lower averages are ahead.
What they’re saying:
Commenting on the study’s findings and offering some advice to prospective buyers, WalletHub analyst Chip Lupo said, “Auto loans are unfortunately a necessity for many Americans, but there are plenty of good ways to decrease the amount of interest you’ll need to pay. For example, you can compare multiple loan offers, and buy a used vehicle or make a large down payment.”
Lupo continued, “Prior to buying a car, you should also practice good financial behavior with other types of credit, like credit cards, as better credit scores lead to lower interest rates. Finally, you can always refinance your car loan in the future to lower your interest rate.”
My thoughts:
As someone who recently purchased a car, these average rates seem about right to me (although, thankfully, mine is significantly lower than my state’s 11.11% average). But, while it’s too late for me, I do hope that those buying new or used vehicles in the coming months will be able to secure lower interest rates thanks to recent and expected Fed rate cuts.
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