Estimated read time: 2-3 minutes
- Utah ranks fifth in the U.S. for rising car loan balances, averaging $20,849, a WalletHub study said.
- WalletHub's Chip Lupo warns of increased default risks due to high auto debt.
- Experts advise possibly refinancing or pre-shopping loans to manage debt and avoid overspending.
SALT LAKE CITY — The average price that drivers pay for their cars has never been higher. Now, Utahns are also carrying nearly the fastest-growing car loan debt in the nation.
Utahns are now carrying an average balance of $20,849 for their wheels. According to WalletHub, that's a jump of 1.49% in the last three months alone. That's enough to rank Utah as the fifth highest in the country for the biggest jump in car loan balances. Most states saw their car loan balances either go up by less than 1% or go down.
"1.5% increase in just one quarter — that's a pretty alarming number," said WalletHub's Chip Lupo.
Lupo says Utahns have long gotten good marks for paying our bills on time, but the higher our auto debt goes, the higher the likelihood that some drivers will miss payments and default on their loans.
"There's a little bit of overspending going on," he said.
We have reported on how many people are already opting for seven-year loans or longer to bring down their monthly payment to something more manageable. The trade-off means paying far more on interest over time.
"I think that's why people are looking to refinance and why lenders are all of a sudden saying, 'Oh, you have a pretty heavy monthly amount,'" personal financial adviser Shane Stewart told us.
He says refinancing a car loan can make sense when rates drop, or if your credit has improved since you bought the car.
"As that credit score improves, you might be able to get a better rate, and why not? That is a great reason to refinance," Stewart said.
Related:
Refinancing your car loan can save you money, but there are potential roadblocks
If you hear the word "refinancing," you might think of home loans, but it also applies to your car loan. The question then becomes, will it save you money? Not necessarily.But refinancing isn't the answer for everyone.
If your car is older, has close to 100,000 miles on the odometer or it's already nearly paid off, most lenders won't touch it.
And stretching out a loan too long can leave you underwater — owing more than your vehicle's worth.
"You don't want a loan so far out that it outlives the depreciation of your car," said Stewart.
You'll have a smoother ride, experts say, if you shop for a loan before stepping into a dealership. That'll help you minimize what you'll owe on a car before you fall in love with its high-tech features, those leather seats and the new car smell.
