The latest reports from the Federal Reserve show consumer credit growth at a seasonally adjusted rate of 5.3%. Credit card usage and other forms of revolving credit decreased by 2.4%, but an increase of 7.6% in non-revolving credit more than made up for the drop.
Car loans were among the categories that saw the most pronounced growth. Outstanding car credit was at $1.24 trillion in Q1 2021, compared to $1.22 trillion in Q4 2020 and $1.18 trillion in Q1 2020.
The increased demand for automobiles is helping to push up the price of used cars, contributing to credit usage. Prices for used vehicles increased 18% from last year, with a short supply of used cars to meet the demand being the primary contributing factor.
Reports from the dealership management software manufacturer vAuto show that there are around 2.4 million used cars in the US. That’s over half a million fewer cars than there were a year ago.
Matt DeLorenzo, a managing editor at Kelley Blue Book, noted that even if people can find the car they want with such a short supply, they will likely pay more than they may expect.
A report from Kelley Blue Book revealed a year-over-year increase in car price of 2.2% ($864) in April. The most significant growth, per the report, was in the luxury full-size SUV/crossover segment, while prices for electric vehicles decreased by 10.8% in the same period.
Many people are finding it difficult to adjust to such a volatile car market. However, historically low-interest rates are helping to make up for the price hikes by making car loans more accessible and car payments more manageable.