Car Loans Surge—Further Suggesting Economy Recovery
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UPDATED: Feb 14, 2012
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Reports about the auto loan and student loan industry bring optimism and good news about our nation’s recovering economy. According to the Wall Street Journal, borrowing of car loans, students loans, and other types of financing increased 9.9 percent in November and 9.3 percent in December—both percentages adjusted to account for holiday spending.
That signals the biggest two-month surge since late 2001, when auto makers issued zero-percent financing following the September 11 attacks on the World Trade Center.
This sharp rise in auto loan and student loan borrowing is very telling of the economy’s current state, as it shows that people are becoming more willing and able to take out financing.
Heather Davidson, for example, spent the past several years paying off her student loan debt and establishing a good credit score. She told the Journal that she could afford a vehicle that last year, but was hesitant due to the state of the economy.
In December, however, she and her husband got a car loan to buy a $57,000 2012 Nissan Armada, taking on a hefty $650 monthly payment for six years.
“We had looked at our budget, and it was something we knew we were comfortable affording,” Davidson explained.
She attributes her and her husband’s confidence to recent reports that the economy is recovering. The record-breaking low interest rates didn’t hurt either.
Due to borrowers like Davidson, the surge in car loans and the boost in auto sales lifted our economy’s annual growth rate by a full 2.8 percent in the last three months of 2011.
This recovery data “suggest we’re getting the normal dynamics of a recovery in place,” said Troy Davig, Barclays Capital economist, as he offered his professional opinion to the Journal. “I think it’s key in terms of consumer spending… it does suggest consumers are again willing to step out and buy larger-ticket items.”