Buying a car is a significant financial commitment that not many can make without financial assistance. Auto loans are the optimal financial tool that helps buyers purchase a vehicle by spreading the cost over a more extended period of time.
However, these loans come with an interest rate which can cause the overall loan cost to soar. In this blog, we have listed down the top 10 states with the highest average auto loan debt and compared it with the states with the best interest rates after refinancing.
We have also discussed how auto loan refinancing works, what interest rates one can expect, and mentioned states with some of the worst original interest rates before refinancing. This blog aims to equip buyers with the right information so that they make an informed decision about their car loan.
How Auto Loan Refinancing Works
Auto loan refinancing is taking out a new loan to pay off and replace your current auto loan. The new loan may have better terms to reduce your monthly payment or lower your interest rate. Refinancing an auto loan depends on several personal factors, such as credit score and debt-to-income ratio.
Auto loan debt is the third-largest debt category with Americans accumulating $1.52 trillion in debt. People take years to pay off their debt, and the average American takes out $61.8 billion in new auto loans each month. It’s worth noting that delinquency rates for auto loans have risen since 2013, with just under 5% of borrowers over 90 days delinquent as of 2019.
What Interest Rates Can I Expect?
The interest rate on your auto loan will depend on several factors that will vary depending on your personal situation. The lender’s prime rate, your credit score, and the value of the vehicle you are financing all play a role in determining the interest rate that you will receive. Payments will consist of both principal and interest, with the interest portion being higher at the beginning of the loan term than at the end.
Auto loans have become one of the largest debt categories in America, with Americans owing a total of $1.52 trillion in auto loan debt. Delinquency rates on auto loans have been steadily increasing since 2013, with just under 5% of delinquent accounts being more than 90 days overdue in 2019. The average length of auto loans is 69.7 months for new cars, 68.1 months for used cars, and 35.9 months for leased vehicles.
If you’re planning on getting an auto loan, the key to getting the best interest rates is having a good credit score. On average, the interest rate for a 60-month auto loan for a new car is 4.77%, 20 points higher than a 36-month used car loan for the same amount. The average auto loan amount in the US is $41,665 for a new vehicle and $28,506 for a used one.
States With the Best Interest Rates After Refinancing
Refinancing an auto loan can help you get the best interest rates for your vehicle. Refinancing auto loans might be an ideal decision if you live in a state with high auto-loan debt. Data from the Federal Reserve Bank of New York and Credit Sesame Credit Score Survey find that Michigan has the lowest average auto-loan debt in the US, at $14,698, which is 31% lower than the national average.
In contrast, Alabama, Tennessee, and South Carolina have higher rates of auto-loan delinquencies than their subprime borrowers. Delinquencies often occur in states with a lower average credit score. Additionally, states such as North Dakota, Oregon, Maine, Massachusetts, and Nebraska have significantly lower amount of auto-loan delinquency rates, indicating that they have the best interest rates after refinancing.
10. Washington (tied)
When it comes to interest rates after refinancing, Washington State is among the best in the US with a tied ranking. Utah has the lowest average student loan debt in the country, while Connecticut has the highest. Hawaii and Massachusetts have the lowest average car loan balance, with both states benefiting from high median household incomes and credit scores. Overall, the Class of 2017 in almost every state has an average student loan debt of $28,650, with 45% or more students in debt.
In terms of auto-loan delinquency rates among borrowers with subprime credit scores, Alabama, South Carolina, and Tennessee have the highest rates, while North Dakota, Oregon, Maine, Massachusetts, and Nebraska have the lowest. These facts and figures show the varying financial situations of people across different states in the US.
10. Connecticut (tied)
After refinancing, Connecticut (tied with Hawaii) has one of the best interest rates for auto loans among the top 10 states with the highest average auto loan debts. Refinancing can be a great option for those looking to save money on their auto loan repayments. It’s worth noting that Alabama, South Carolina, and Tennessee have the highest auto-retail loan delinquency rates, which may be attributed to lower credit scores. The data analyzed for this study was taken from the Federal Reserve Bank of New York and the Credit Sesame Credit Score Survey. The top 20 states with above-average delinquency rates were included in the analysis. Among these states, the next 10 states had the worst original interest rates for auto loans.
If you’re looking to refinance your auto loan to get a better interest rate, Minnesota may be a good option. The state has seen decreasing delinquency and default rates for private student loans over the past decade, and the Public Service Loan Forgiveness program has forgiven over $1 billion in federal loans for Minnesota borrowers, with an average debt discharge of $95,000.
While delinquency and default rates for federal student loans in Minnesota are not complete due to Covid-19 forbearance, about 5% were delinquent or in default in Q4 2021. Additionally, an additional 1.3 million Minnesota borrowers may be eligible for Public Service Loan Forgiveness, representing about $132 billion in debt. According to historical data, federal Direct loans in Minnesota are considered in default after 270 days of non-payment.
8. New Hampshire
If you’re looking to refinance your auto loan in search of better interest rates, it’s worth considering New Hampshire. While the state has the eighth-highest average auto loan debt in the country, it has a variety of lenders who offer competitive interest rates for qualified borrowers looking to refinance.
Additionally, New Hampshire has seen improvement in student loan delinquency rates and an increase in approved Public Service Loan Forgiveness (PSLF) Employment Certification forms. Over $1 billion in federal student loans have been forgiven through the PSLF program. However, it’s important to note that longer loan terms can result in higher interest costs over time. As with any loan, it’s important to do your research and compare terms and interest rates from multiple lenders before refinancing.
If you live in California and are looking to refinance your auto loan, there are a few important things to keep in mind. The minimum borrowing amount for vehicle refinancing in California is $7,500, so make sure your loan amount meets this requirement before applying. It’s also important to carefully consider your interest rate options, as higher interest rates on car loans can result in negative equity situations where you owe more money than your car is actually worth.
Additionally, if you opt for a longer-term car loan, you’ll likely end up paying more in interest payments and finance charges over time. Nonprime or fair credit score individuals may also end up paying the highest new vehicle monthly payments in California. Lastly, it’s worth noting that used car prices in California tend to decrease over time, potentially leaving consumers with outstanding debt on their car loans. All of these factors should be considered carefully when choosing to refinance your auto loan in California.
While specific refinancing options and interest rates for Vermont are not mentioned in search results, the state has made recent efforts to alleviate debt burdens for its residents. In 2021, over $1 billion was forgiven through Vermont’s Student Loan Forgiveness program. While 5% of student debt in the state was in default in 2021, it’s unclear how Covid-19 forbearance may be affecting these numbers. For those looking to make additional principal payments, Vermont allows payments to be made up to three months in advance. While details on Vermont-specific refinancing options are not readily available, exploring all potential options can help individuals with auto loan debt find the best interest rates to fit their financial needs.
Refinancing can lead to lower interest rates for auto loans in Nebraska, making it one of the states with the best rates. Additionally, Nebraska has been successful in student loan forgiveness through the Public Service Loan Forgiveness (PSLF) program. In fact, the program has forgiven over $1 billion in student loans in Nebraska alone. As of 2021, 10,776 borrowers have successfully had their federal loans forgiven through the PSLF program in Nebraska.
With around 1.3 million borrowers potentially eligible for the program, representing about $132 billion in debt, Nebraska is a great state for those considering loan forgiveness options. Furthermore, Nebraska boasts a high approval rate for PSLF Employment Certification forms, with 99.7% meeting the employer requirements.
If you are looking to refinance your auto loan, Pennsylvania is a good state to consider. The state offers competitive interest rates for refinancing, which can help you lower your monthly payments and save money over the life of your loan. Additionally, Michigan has the lowest average auto debt, making it an attractive option for those looking to minimize their overall loan amount.
It’s important to keep in mind that delinquency rates on subprime auto loans vary by state, with the highest rates found in Alabama, South Carolina, and Tennessee. When it comes to private student loans, delinquency rates also vary by state. If you are struggling to keep up with your loan payments, consider refinancing or speaking with a financial advisor. Overall, states with above-average delinquency rates should be approached with caution, and borrowers should carefully consider their financial situation before taking on any new debt.
If you’re looking to refinance your auto loan in Massachusetts, it’s important to consider a few key factors. First, historical delinquency rates for private student loans in the state are available from Q3 2021, which may impact your credit score and, subsequently, your ability to secure a low-interest rate. Additionally, longer car loans in Massachusetts have higher interest rates and finance charges, so it’s important to carefully consider the loan term before signing on.
While there are no current interest rates available after refinancing in Massachusetts, it’s worth noting that the state has over $1 billion in federal student loans forgiven through the PSLF program, with an average discharge of $95,000. In terms of auto loans specifically, the minimum borrowing amount for a vehicle in Massachusetts is $7,500. By taking these factors into account, you can make an informed decision about whether refinancing your auto loan in Massachusetts is the right choice for you.
2. Rhode Island
Rhode Island is one of the states with the best interest rates after refinancing an auto loan. The current average refinance interest rate in Rhode Island is 6.0%, with an annual savings of $1,104. Despite this positive news, the state has had a history of delinquencies for private student loans. However, the data on this topic is incomplete due to Covid-19 forbearance.
Auto loan delinquencies are also on the rise, particularly with subprime borrowers, due in part to relaxed borrowing requirements. It is important for Rhode Island residents to carefully consider their financial situation before taking on any new loans or refinancing existing debts. With a population density that is the second-highest in the U.S., it is crucial for Rhode Island residents to be knowledgeable about their financial options.
One of the best states to refinance your auto loan is Maine, which has some of the lowest interest rates in the country. Additionally, Michigan has the lowest auto loan balance, 31% below the national average, while Alabama has the highest auto-retail loan delinquency rate among subprime credit score borrowers. It’s important to note that these rates are based on Urban Institute credit bureau data and may not fully capture people in the “buy here pay here” auto-lending space.
Another advantage of refinancing in Maine is that the average student loan debt is $31,364, which is lower than the national average. Ultimately, it’s important to do your research and find the best interest rates and loan terms for your specific financial situation.
States With the Worst Original Interest Rates (Before Refinancing)
When it comes to auto loans, some states have worse original interest rates than others. In fact, ten states have the worst original interest rates, making them unfavorable for borrowers. Refinancing an auto loan can save you more than $1,000 per year on average, reducing the debt burden. Alabama, South Carolina, and Tennessee have the highest auto-retail loan delinquency rates among subprime borrowers, while North Dakota and Oregon have the lowest rates.
States with lower average credit scores are more likely to have higher auto loan delinquency rates. The top 20 states with the most auto loan debt are concentrated in the Southeast and Southwest regions. However, refinancing can turn things around, and these 10 states offer some of the best interest rates for auto loan refinancing. Despite that, Urban Institute credit bureau data does not fully capture the loan costs and delinquency rates in the “buy here pay here” auto-lending space, which can be much higher.
10. Alabama (tied)
While there is no data available on the worst original interest rates for auto loans by state, it is important to note that Alabama has one of the highest average auto loan debt levels in the US. In fact, it is tied for tenth place on the list of states with the highest average auto loan balances. However, it’s worth noting that the average auto loan balance in Alabama is still lower than in some other states, and it may be possible to refinance the loan to get a better interest rate. Ultimately, it’s important to do your research and shop around for the best possible loan terms before making a purchase.
10. Tennessee (tied)
When looking at the states with the worst original interest rates on auto loans, Tennessee comes in at number 10 (tied). Tennessee has a 4.16% delinquency rate on auto loans, which can be attributed to the fact that states with lower average credit scores tend to have higher auto loan delinquency rates. Additionally, Tennessee’s per capita auto loan debt is $4,440. In contrast, Michigan has the lowest average auto debt in the US at $14,698. Overall, just under 5% of auto loan borrowers in the US were over 90 days delinquent in 2019, highlighting the importance of carefully considering interest rates and borrowing responsibly.
Unfortunately, specific information regarding Virginia’s average auto loan balance, interest rates, percentage of auto debt 90+ days delinquent, and per capita auto loan debt is not provided in the given search results. However, it is important to note that delinquent auto loan accounts in Virginia have been steadily rising since 2013. This suggests that borrowers in the state may be struggling to make their monthly payments, which could be attributed to high-interest rates or other financial difficulties. It is crucial for individuals in Virginia and other states with high auto loan debt to carefully consider their financial situation before taking on additional debt.
Before refinancing, Michigan had the worst original interest rates for auto loans among the states with the highest average auto loan debt. Despite this, Michigan had the lowest auto loan balances with an average of $14,698 in Q2 2019. The state’s 90+ days delinquent auto loan rate is 4.69%, with an average credit score of 675. While auto loan delinquency rates have steadily risen since 2013, they are still under 5% in Michigan for 2019.
Auto loan debt is the third-largest category behind mortgages and student loans, with a total of $1.52 trillion overall. Americans typically take many years to pay off their auto loans, with an average term of 69.7 months for new cars. It is important for borrowers to be aware of interest rates and payment terms when taking out an auto loan in order to avoid accumulating too much debt.
Refinancing an auto loan can be a smart move, especially in states where interest rates on original auto loans are high. According to recent data, Oklahoma made it to the list of the top 10 states with the worst original interest rates for auto loans. But borrowers in these states can potentially save over $1,000 per year by refinancing their auto loans.
It’s worth noting that states with lower average credit scores are more likely to have high delinquency rates, with Alabama, South Carolina, and Tennessee have the highest auto-retail loan delinquency rates for subprime credit scores. On the other hand, North Dakota and Oregon have the lowest. The Urban Institute’s credit bureau data may not fully capture people in the “buy here pay here” auto-lending space, where loan costs and delinquency rates can be much higher. Nevertheless, refinancing an auto loan can still help borrowers save a significant amount of money, and there are states that offer the lowest interest rates for auto loan refinancing.
Wyoming is one of the states with the worst original interest rates on auto loans, although the exact rate is not specified in the available web search results. In 2019, just under 5% of auto loan borrowers in Wyoming were over 90 days delinquent, indicating that many borrowers are struggling to keep up with payments.
Auto loans in Wyoming have varying terms ranging from 1 to 8 years, with weekly, biweekly, semi-monthly, or monthly payment options. Interest rates for auto loans in Wyoming are determined by factors such as the lender’s prime rate, the borrower’s credit score, and the vehicle being purchased. Payments are typically split into two parts: interest and principal.
To help lower vehicle prices, car dealerships in Wyoming may offer factory cash rebates, discounts, and special financing offers. Despite these potential discounts, the high original interest rates on auto loans in Wyoming can make it difficult for borrowers to maintain financial stability.
5. New Mexico
New Mexico is one of the states with the worst original interest rates on auto loans, with a per capita auto loan debt of $5,190 and an auto loan debt percentage of the total at 13.42%. The average car loan balance in the US is $5,210, with New Mexico falling within the range of $3,000 to $6,000. Despite the median credit score of auto loan borrowers being above 674 since 2005, New Mexico continues to have high auto loan debt. According to Experian, the average auto loan for a new vehicle in Q3 2022 was $41,665, highlighting the importance of carefully considering interest rates when applying for an auto loan.
Mississippi ranks among the states with the worst original interest rates for auto loans. According to recent data, the average per capita auto loan debt in Mississippi is $4,840. Additionally, the state has an auto delinquency rate of 6.43% and an auto loan debt percent of the total of 15.65%. The average credit score for Mississippi is 643. While the average auto loan debt in Mississippi is lower than that of some other states, such as South Carolina, it’s important for residents to be aware of their loan terms and to make timely payments to avoid falling into delinquency.
Missouri is one of the states with the worst original interest rates for auto loans before refinancing. In 2019, just under 5% of Missouri auto loan borrowers were over 90 days delinquent, but the average car loan balance for the state is not specified. Auto loan interest rates in Missouri typically depend on several factors, including the lender’s prime rate, the borrower’s credit score, and the vehicle attached to the loan.
Auto loan delinquency rates in Missouri can also vary widely by region, with some counties experiencing rates as high as 55% for subprime borrowers. Although Missouri is not mentioned in the list of states with the highest or lowest shares of auto-retail loan delinquency rates, borrowers in the state should be aware of the potential for high-interest rates and delinquencies when taking out an auto loan.
When it comes to original interest rates for auto loans, Utah ranks among the worst states in the country, but the actual interest rate is not specified in the given search result. To obtain a loan in Utah, borrowers must meet certain requirements, such as a minimum borrowing amount of $7,500 and the total cost of the vehicle exceeding the borrowing amount. Borrowers are also encouraged to review and adjust their down payment and trade-in amounts when applying for a loan in Utah. However, the state does offer cash incentives that can be applied to the loan, helping borrowers to reduce their debt. Overall, those seeking an auto loan in Utah should be aware of the state’s specific requirements and options before applying.
1. District of Columbia (DC)
One of the worst states for original interest rates (before refinancing) on auto loans is the District of Columbia. Borrowers in the 10 worst states with high-interest rates for auto loans save an average of over $1,000/year by refinancing. Additionally, states with lower average credit scores have higher delinquency rates, and the top 20 states with the most auto loan debt are more likely to be in this category. It’s worth noting that Urban Institute credit bureau data may not fully capture the high loan costs and delinquency rates found in “buy here pay here” auto-lending spaces. On the other hand, borrowers in the 10 best states for auto loan refinancing interest rates can save a significant amount of money. It’s crucial to compare interest rates to determine the best deal available.
Auto loan debt can take a toll on your finances if not managed wisely. Refinancing auto loans has helped many people lower their interest rates and monthly payments, hence reducing their financial burden. Depending on which state you reside in, you may have better refinancing options than others, with states like Maine and Rhode Island offering the best interest rates after refinancing. On the other hand, if you are located in states such as Alabama or Tennessee, refinancing may be especially advantageous as these states have some of the highest original interest rates. Take control of your auto loan debt by considering refinancing options that work best for you. Want to know more about how to refinance your auto loan? Download our guide now.