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Millennials’ auto debt has grown faster than it has for any other generation over the past seven years, according to survey data from Experian.
The survey found that millennials have an average auto loan debt balance of $18,201 as of the second quarter of 2019 — a 3% boost from the same quarter last year and an increase of 28% since 2012. Generation X follows close behind with a 27% increase in auto loan debt since 2012.
While the average auto loan debt balance of just over $18,000 for millennials is still below the national average by about $1,000, according to Experian, it’s clear that millennials are accumulating debt across the board — not just with auto loans but student loans, credit cards and mortgages.
But why are millennials driving up their auto debt in the fast lane? Read on to learn more.
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Age, the current job market and vehicle prices generally can all contribute to fast-growing millennial auto debt.
Millennials are now between the ages of 25 and 38. This means that even the youngest millennials are likely out of college, starting their careers and — thanks to a booming job market — feeling ready in many cases to make larger purchases like cars.
Adding to that equation: A significant rise in average new-vehicle prices. The average new-vehicle price is expected to reach over $30,000 this year, according to JD Power, so it makes sense that a generation now able to buy vehicles would be taking on more debt as a result.
If you’re wondering how to keep your auto loan debt in check, here are some tips.
- What credit scores you should have before applying for an auto loan — There are no universal minimum credit scores required for a car loan, but your scores can significantly affect your ability to get approved for a loan with terms that are financially healthy for you.
- What to know about prequalifying for an auto loan — Getting prequalified for a loan can help you determine whether you might be approved for a loan, and with what terms. Just keep in mind that getting prequalified doesn’t mean you’re approved — you’ll still need to fill out a formal loan application for the lender to review, and you could be denied or might end up with different terms than your prequalification suggested. Nevertheless, getting prequalified for an auto loan can save you a big step in the process when you head to a dealership — once you choose a car and a price, preapproval can give you an idea of whether it’s in your budget. It could save you money over dealership financing, too.
- The best place to get an auto loan — Researching all your loan options before arriving at a dealership can help you understand the pros and cons of different auto loan options, including banks, credit unions, online lenders and dealerships. The best option for you will vary based on your needs, preferences and credit history.