2016’s Cities That Overspend On Cars & Auto Financing Report by WalletHub
2016’s Cities That Overspend On Cars
by Richie Bernardo, WalletHub
Auto sales hit a new record in 2015, but some drivers might be on the road to financial ruin. According to the Federal Reserve Bank of New York’s latest report on household indebtedness, auto-loan balances increased during Q3 2015 — for the 18th consecutive quarter — raising our total collective car debt to $1.05 trillion as of this past Sept. 30.
Although Americans’ heightened appetite for auto debt suggests a strengthening economy, the share of car loans originated by subprime borrowers with credit scores below 620 — $33 billion of the $151 billion total — stands near its peak in a decade, giving reason to pause for concern.
But it’s a different story in every city. WalletHub’s analysts compared the average auto-loan balance of residents in each of 2,570 U.S. cities to determine where Americans overspend on their set of wheels. In addition, we recommend prospective car buyers get their free credit score and leverage a Car Payment Calculator to determine what they can afford and how long it would take to pay off their future auto loan.
2016 Auto Financing Report
by John S Kiernan, WalletHub
With gas prices dipping to their lowest since 2004, the jobless rate also falling to an eight-year low and wages rising aggressively, consumers are most likely wondering whether now is a good time to buy a car.
In 2015, the auto industry witnessed its highest sales in 15 years, selling more than 17 million cars and light-duty trucks. That again was due to positive developments in the U.S. economy, and so far 2016 is off to a good start. But recent signs of a slump ahead could reverse that trend as the year progresses.
Such competing economic patterns bring clarity as to why a simple question like whether now is the right time to buy a car demands the consideration of widely ranging factors — from your monthly disposable income to the type of vehicle you’re eyeing to whether you should buy or lease. The data provided in this report, along with our panel discussion featuring top industry experts, will help you make those decisions. This information is based on a detailed analysis of auto financing offers from a diverse group of 158 lenders. Scroll down for the complete results.
Key Findings
- Interest rates for new cars are close to their lowest point in the past three years. However, the average new-car loan now charges 16 percent less interest than the average used-car loan.
- Now is the time for people with excellent credit to buy used cars. The average interest rate for such buyers has fallen nearly 32 percent since the beginning of 2014.
- Overall, buyers who have fair credit will end up spending about six times more to finance a vehicle than someone with excellent credit, which equates to $6,176 in additional interest payments over the life of a $20K, five-year loan.
- People in the market for a new car should start their search for financing with car manufacturers (rates 33 percent below average) and credit unions (32 percent below average). National banks (2 percent below average), and regional banks (33 percent above average) should be secondary options.
- Car manufacturers continue to lack transparency when it comes to leasing offers, with the average one receiving a WalletHub Transparency Score of 4.5/10. The most transparent manufacturers are currently Mazda, Infiniti, Mini, BMW, Acura, Mercedes, Honda, Volkswagen, Kia, Toyota, Nissan and Hyundai and even they registered only a 6-point rating.
- Dodge, Nissan, Honda and Mini offer the lowest auto financing rates out of the major car manufacturers we surveyed. Chevrolet, Jaguar, Volvo and Toyota have the best leasing offers, on the other hand.
- If you plan to keep your car for only three years, 86 percent of manufacturers will give you a better deal if you finance instead of lease. Nevertheless, always make sure to do the math in order to ensure you’re maximizing savings.
Who Offers the Best Rates?
Note: Above data is based on a 36-month term.
Auto Financing Offers by Car Manufacturer
It is important for consumers to understand that car-dealership financing offers may originate from the financing arm of a car manufacturer or from a third-party financial institution. The following offers reflect financing available directly from car manufacturers’ financing arms.
| Car Manufacturer | Financing APR Q1 2016 | Lease APR (inferred interest rate) Q1 2016 |
| Chevrolet | 1.99% | 1.91% |
| Jaguar | 1.90% | 2.57% |
| Volvo | 1.99% | 2.70% |
| Toyota | 2.99% | 1.94% |
| Nissan | 0.90% | 4.53% |
| Kia | 2.99% | 2.70% |
| Acura | 1.90% | 4.06% |
| Dodge | 0.00% | 5.99% |
| Cadillac | 1.90% | 4.17% |
| Volkswagen | 2.90% | 3.23% |
| Infiniti | 1.90% | 4.81% |
| Buick | 2.90% | 3.88% |
| Hyundai | 2.99% | 4.18% |
| Mercedes | 2.99% | 4.23% |
| Honda | 0.90% | 6.40% |
| Mini | 0.90% | 6.84% |
| Mazda | 1.99% | 5.76% |
| BMW | 2.92% | 4.97% |
| Ford | 2.90% | 5.00% |
| Subaru | 1.49% | 6.59% |
| Lexus | 2.90% | 5.26% |
| Audi | 3.90% | 5.83% |
| Average | 2.19% | 4.43% |
Note: Above data is based on a 36-month term. The APRs presented for the financing and lease programs of the car manufactures are only informative. The actual values that one can obtain are based on various factors, including the borrower’s credit worthiness, income, location of residence, promotional programs and even negotiation skills. Make sure to always check upfront with a dealer about the availability of any discounts for particular groups (i.e. USAA members) that you might qualify for as well as whether any other costs and/or restrictions may be imposed, especially in the case of lease contracts.
Rates Over Time
Note: Above data is based on a 36-month term.
Excellent vs Fair Credit Score
Note: Above data reflects a $20,000 five-year loan for a new car with a fixed interest rate, using WalletHub’s interest rate data from Q1 2016.
Manufacturer Transparency
Leasing offers are the most difficult type of car-purchasing arrangement for consumers to understand, as they lack the equivalent of an APR that can be used for comparison purposes. As a result, the transparency of manufacturers about these deals is integral to a consumer’s ability to make informed decisions.
| Manufacturer | Transp. Score Q1 2016 | Manufacturer | Transp. Score Q1 2016 | |
| Mazda | 6 | Hyundai | 6 | |
| Infiniti | 6 | Subaru | 5 | |
| Mini | 6 | Ford | 3 | |
| BMW | 6 | Dodge | 3 | |
| Acura | 6 | Audi | 3 | |
| Mercedes | 6 | Lexus | 3 | |
| Honda | 6 | Chrysler | 3 | |
| Volkswagen | 6 | Volvo | 2 | |
| Kia | 6 | Buick | 2 | |
| Toyota | 6 | Cadillac | 2 | |
| Nissan | 6 | Chevrolet | 2 |
Auto Loan Debt Over Time
2016’s Cities That Overspend On Cars & Auto Financing Report
With President’s Day upcoming, auto sales hitting a new record in 2015 and roughly 22 percent of total auto-loan originations falling in the “subprime” category, the personal finance website WalletHub today released the first-quarter installment of its 2016 Auto Financing Report in conjunction with its in-depth analysis of 2016’s Cities that Overspend on Cars.
Below are some of our key findings from each of the two reports:
| Cities that Are Most Frugal on Cars | Cities that Overspend on Cars | |||
| Scarsdale, NY | Ithaca, NY | |||
| Bronxville, NY | Rio Grande City, TX | |||
| Hoboken, NJ | West Lafayette, IN | |||
| Bloomfield Hills, MI | College Station, TX | |||
| Cupertino, CA | Ellensburg, WA | |||
| Lexington, MA | Williamsburg, VA | |||
| Los Altos, CA | Morgantown, WV | |||
| Winchester, MA | Collegeville, PA | |||
| Chevy Chase, MD | Statesboro, GA | |||
| McLean, VA | Mount Pleasant, MI | |||
| Saratoga, CA | College Park, MD | |||
| Arlington, MA | East Lansing, MI | |||
| Birmingham, MI | Blacksburg, VA | |||
| Foster City, CA | Rexburg, ID | |||
| Mill Valley, CA | Pullman, WA | |||
| Ridgewood, NJ | Indiana, PA | |||
| Westfield, NJ | State College, PA | |||
| Marina del Rey, CA | Gettysburg, PA | |||
| Needham, MA | Athens, OH | |||
| Potomac, MD | Boone, NC | |||
Auto Financing Report:
- Interest rates for new cars are close to their lowest point in the past three years, with the average new-car loan now charging 16 percent less interest than the average used-car loan.
- Overall, buyers with fair credit will end up spending about six times more to finance a vehicle —about $6,176 in additional interest payments over the life of a $20,000, five-year loan — than consumers with excellent credit.
- Consumers in the market for a new car should begin their search for auto financing with car manufacturers (rates at 33 percent below average) and credit unions (rate at 32 percent below average). Secondary options include national banks (rates at 2 percent below average) and regional banks (rates at 33 percent above average).
- Car manufacturers continue to lack transparency when it comes to leasing offers, with the average automaker receiving a WalletHub Transparency Score of 4.5 out of 10.
We recommend prospective car buyers get their free credit score and leverage a Car Payment Calculator to determine what they can afford and how long it would take to pay off their future auto loan.
