The U.S. States with the Largest Car Loan Debts

Car loans have significantly impacted Americans’ financial responsibilities, with balances on the rise in 2024. In certain states, residents are accumulating even larger car loan debts, influenced by factors such as the types of vehicles purchased, local economies, interest rates, and borrowing patterns.

This article explores the states with the highest car loan balances, shedding light on the key factors driving these numbers and offering insights into the ongoing trend of increasing auto loan debt across the U.S.

The Rising Tide of Auto Loan Debt

As of 2024, U.S. consumers collectively owe more than $1.6 trillion in auto loans. Rising interest rates and inflation have contributed to the growing burden of car loans, especially in states where vehicle ownership is essential due to limited public transportation. Longer loan terms, which stretch repayment periods to five, six, or even seven years, also play a role in inflating these balances. Many buyers opt for larger loans to cover the rising cost of both new and used vehicles.

States Leading in Car Loan Balances

When examining car loan balances in the United States, several states stand out for their high outstanding balances. Factors contributing to these rankings often include local economic conditions, cost of living, car prices, and the overall rate of vehicle ownership. Here are some states typically leading in car loan balances:

Wyoming

Wyoming leads the nation with the highest average car loan balance. On average, consumers in Wyoming owe over $24,000 in auto loans. This figure is well above the national average, reflecting the state’s reliance on personal vehicles and higher-than-average vehicle prices. Wyoming’s spread-out geography and minimal public transport options make car ownership a necessity, pushing residents toward significant auto debt.

Texas

Texas ranks just behind Wyoming with an average loan balance of around $24,000. The state’s large population, combined with a culture of truck ownership and the purchase of higher-end vehicles, drives these figures upward. Texas’s thriving economy and relatively low cost of living allow consumers to take on larger loans to finance more expensive vehicles. However, this also means longer loan terms and higher cumulative debt for many Texans.

New Mexico

New Mexico follows closely, with average auto loan balances exceeding $23,000. As with Texas, many New Mexico residents rely heavily on personal vehicles for transportation, particularly in rural areas where public transport is sparse. New Mexico also has a higher percentage of subprime borrowers, who often face higher interest rates, further inflating their total loan balances.

Louisiana

Louisiana is another southern state with high car loan balances, averaging around $23,000 per borrower. The state’s relatively low average credit scores contribute to higher interest rates and larger loan payments. In addition, the preference for trucks and SUVs in Louisiana, as well as the state’s challenging weather conditions, means that residents often purchase larger, more durable vehicles that require larger loans.

Oklahoma

Rounding out the top five, Oklahoma has an average car loan balance of just over $22,500. Similar to its neighbors Texas and Louisiana, Oklahoma residents tend to favor larger vehicles, which come with higher price tags and more substantial loans. The state’s rural areas also drive demand for personal vehicle ownership, with longer commutes leading to a preference for newer, more reliable cars.

Factors Contributing to High Auto Loan Balances

Several factors contribute to high auto loan balances, influencing both the total amount borrowed and the length of time it takes to pay off the loan. Key factors include:

Vehicle Prices and Interest Rates

The increasing cost of vehicles, especially with the growing popularity of SUVs and trucks, has been a significant driver of rising loan balances. Many consumers are opting for larger, more expensive vehicles, which come with larger loans. Additionally, interest rates have been on the rise, which means consumers are paying more over time for the same loan amount.

Longer Loan Terms

Many borrowers are opting for longer loan terms, sometimes stretching up to 84 months (seven years), to make monthly payments more manageable. While this reduces the monthly payment, it also increases the total amount paid over the life of the loan, especially when factoring in interest.

Lower Credit Scores and Higher Interest Rates

In states like Louisiana and New Mexico, where average credit scores are lower, consumers often face higher interest rates, further inflating their loan balances. Subprime borrowers are particularly vulnerable to higher costs, as lenders charge higher interest rates to compensate for the perceived risk.

Regional Economic Factors

In rural and less densely populated states, such as Wyoming and Oklahoma, personal vehicle ownership is a necessity due to limited public transportation options. This results in more significant car loan balances, as residents need reliable transportation for work, school, and everyday life. Furthermore, in states with larger rural populations, consumers tend to favor trucks and larger vehicles, which come with higher price tags.

Managing the Growing Debt Burden

For consumers in these states, managing high car loan balances can be challenging. Many turn to refinancing as a way to lower monthly payments, though this often extends the loan term and increases the overall cost of the loan. Consumers with lower credit scores should focus on improving their credit before taking out a loan, as even a small improvement in credit score can lead to more favorable interest rates.

Another option for reducing car loan debt is to consider purchasing a less expensive vehicle or a certified pre-owned car, which can offer significant savings without sacrificing quality or reliability. Additionally, making extra payments on a car loan can help reduce the overall balance and save on interest costs over time.

Conclusion

As car loan balances grow, especially in states like Wyoming and Texas, understanding the factors behind this trend is crucial. From rising vehicle prices to longer loan terms, a variety of influences are pushing loan amounts higher.

However, consumers have options to manage this debt, whether through refinancing or considering more affordable vehicles. As we move further into 2024, keeping an eye on these trends can help both individuals and policymakers find ways to ease the burden of auto loan debt.