Consumer borrowing to finance car purchases has recovered to its pre-recession levels, but it appears that young people are not as interested in buying vehicles as previous generations were.
The Federal Reserve Bank of New York reported Wednesday that new auto loans rose by $14 billion to $92 billion in the second quarter of 2013, even as consumers continued to de-leverage in other parts of their budgets.
Total household debt fell by $78 billion to $11.15 trillion, according to the Quarterly Report on Household Debt and Credit, as Americans continue to reduce housing-related debt in the wake of the collapse of the housing bubble. Mortgage balances fell by $91 billion from the first quarter.
Consumers are increasingly willing to borrow for non-housing purchases, though. In addition to an increase in auto loan balances, credit card debt rose and student loan debt neared the one-trillion dollar mark, rising to $994 billion.
New York Fed officials wrote in a post for the Liberty Street Economics blog that the increase in auto debt reflects a strong recovery in auto sales, rather than riskier lending. One cause for concern for U.S. automakers, however, is that “the especially slow recovery in auto borrowing among the young is consistent with recent analysis suggesting a long-term decline in the demand for autos among younger Americans.”
The number of auto loans made to Americans aged 18-29 (represented by the red line in the chart below) has not shown much of a recovery following the recession, leading officials to wonder if young consumers are not as interested in owning cars as previous generations were. Another possibility is that rising student loan debt has crowded out other forms of borrowing.