Rising Auto Loans Boost US Consumer Credit Use in April, Fed Report Says

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More people are buying cars as the pandemic escalates and demand drives up costs. (iStock)

Americans are cutting back on their credit card use for the first time in three months, but making up for it with an increase in auto credit use, according to the last report from the Federal Reserve.

In April, consumer credit grew at a seasonally adjusted annual rate of 5.3%, or $ 18.6 billion, according to the report. Revolving credits such as credit cards have declined at an annual rate of 2.4%, while non-revolving credits such as car loans, personal loans or student loans have increased at an annual rate of 7.6% . Mortgages are not included in the Fed report.

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The report showed that in the first quarter of 2021, there was $ 1.24 trillion in auto credit outstanding, compared to $ 1.22 trillion in the fourth quarter and $ 1.18 trillion in the first quarter of 2020.

Currently, used car prices are up 18% year over year due to growing demand for cars from the COVID-19 pandemic and low supply, according to a recent report by Kelly Blue Book. As auto prices continue to rise, you can save money by reducing your auto insurance payments. Visit Credible to compare rates and lenders with one click.

The biggest contributing factor to the current auto market conditions is the limited supply of used cars. According to vAuto data, there are approximately 2.34 million used cars available in America today. This is more than 530,000 less than a year ago, and about 430,000 less than during the same period in a more normal 2019.

“America may be slowly coming back to some semblance of normalcy, but the auto market is not,” said Matt DeLorenzo, senior editor of Kelley Blue Book. “This means that people’s past car buying experiences won’t be able to tell them exactly how to handle this market. If consumers are even able to find the vehicle they want now, they need to be prepared and understand. that they’re probably going to go there paying more than they probably thought.

“With high demand and low supply, manufacturers aren’t offering as many discounts as people are used to seeing; without incentives available, dealers aren’t able to negotiate as much,” DeLorenzo said. “And we don’t expect that to change much anytime soon – it will be a lean market for a while.”

If you can’t wait for prices to drop to buy a car, consider lowering your car insurance payments to save money. If you are wondering how much you could save, go to Credible which has partners to give you a free quote. It only takes two minutes.

Likewise, a separate report from Kelley Blue Book showed that prices for new vehicles in April were up $ 864 (up 2.2%) year over year, while increasing by $ 92 (up 0.23 %) compared to March 2021.

Of course, historically low interest rates have helped fight some of these rising costs and have helped keep monthly automatic payments affordable.

Already have good auto insurance, but want to make sure you’re alerted when you can get a better deal? Credible partners can send you free quotes if they find you a better price. All you have to do is start here.

Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at moneyexpert@credible.com and your question could be answered by Credible in our Money Expert column.


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