economy
Why one of the nation's largest auto lenders isn't worried about high vehicle prices or 'forever loans'
While median car payments have jumped from $390 to $525 since 2019, data provided by Capital One suggests stability in vehicle cost compared to income.
TL;DR
- Sanjiv Yajnik, President of Capital One Auto, is not concerned about rising consumer automotive debt and inflated used car prices.
- His reasoning is that the percentage of income consumers spend on vehicles has remained relatively flat compared to 2019.
- Capital One's data indicates the payment-to-income ratio for vehicles has stayed at approximately 10% since 2019.
- 80% of financed car purchasers are below the 15% payment-to-income threshold.
- Longer loan terms are being used to keep monthly payments affordable.
- Industry experts are concerned about 'forever loans' (six years or more) leading to negative equity, where buyers owe more than their vehicle is worth.