Americans spend nearly $5k per year on car payments. Here’s why it matters.

In the US, the average household carrying an auto loan spends $412 per month on payments, according to a doxoINSIGHTS US Auto Loans Market Size and Household Spending Report issued Thursday. For the year, the mean auto loan spend is $4,944.

That data might not be much of a surprise for dealerships and salespeople, yet it gives a glimpse into real-world spending habits for the general population. In addition to loan payment amounts, the doxoINSIGHTS report indicates that nearly three-quarters of American households (73%) pay auto loans. For clarity, ‘auto loans‘ refers to monthly payments including financing and leasing agreements.

Payment sweet spot

With the data from doxo, car salespeople and sales management can better understand shopper trends nationally as well as locally. The report breaks down average monthly bills by state and identifies the five most expensive states for car ownership also. Wyoming drivers carry the highest payments on their car loans at $559 per month with 86% of households bearing a car loan. Conversely, Maryland homes have the lowest average at $333 per month with 76% of households paying a car loan.

And interestingly, Illinois has the lowest percentage of the population carrying a car loan at 63%.

Understanding what car owners average for payments is a very broad indicator, but it does help those in sales to position payment structures that better resonate with the buyers. For example, initially showing an average car buyer in Maryland a car payment of $600 per month probably isn’t in line with trends, but it would be close for an Alaskan shopper.

Percentage of income

In addition to monthly payments, the doxo report shows that, on average, car owners make payments roughly equivalent to 8% of their annual income. Again, that’s an average that must be taken in the context of the negotiations, but it provides an approximation of where buyers would be relatively comfortable with payments.

The income percentage spent on car payments can certainly look different for more affluent neighborhoods as well as low-income cities. By paying attention to the approximate values, salespeople can better align the sales presentation for their buyer. Without a doubt, this is a tertiary indicator as the primary should always be data collected with wants and needs assessment directly from the customer.

Middle-class buyers are still the best demographic to seek

Whether at the high end of the payment scale or in a state with a much lower monthly payment average, it’s obvious that middle-class buyers still account for the widest swath of car owners in the country. These payment numbers will creep up as the average price of a vehicle increases, yet it’s firmly entrenched in middle-class income in the nation.

Every salesperson wants the four-pay deals or higher, and luxury vehicles tend to produce more gross, but mass-market models outsell premium and luxury brands by a wide margin. Earn consistent deals on mid-range models in the payment sweet spot by paying attention to your market and your customers.

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