Auto Credit Grade - Champlain College

Auto Credit Grade

For many working families and individuals, owning a car or truck is critical to economic success. For most, a car or other vehicle is their primary means of transportation to work. For those living paycheck to paycheck with little or no savings, not having a car can mean not having a job. For those struggling financially, a car crash or material auto repair can result in job loss. If they are unable to replace or repair their vehicle, they are unable to go to work.

For many working families, transportation costs are second only to housing costs. According to a 2013 U.S. Census Report, 86 percent of U.S. workers commuted to work by automobile and 76 percent of workers drove to work alone. Thus, auto loans are the third largest form of consumer debt after housing and student loans, with approximately $1.1 trillion in outstanding debt.

According to a recent Federal Reserve Board Report, 45 percent of adults surveyed are making payments (loan or lease) on at least one vehicle each month. Nearly a quarter of all adults indicated that they or their spouse or partner had purchased a new or used car or truck in the last year. Those who acquired a new or used vehicle in the last year expected to keep the car or truck for a median of six years. About two-thirds of adults who purchased a new or used vehicle in the past year did so with a loan.

Interest rates paid on these loans and the length of an auto loan vary greatly. Vehicle loans range from as low as zero percent to more than 10 percent. Loan lengths range from less than two years to more than five years. In fact, nearly a third of adults with auto loans have loan terms greater than five years.

The above data from a Federal Reserve Board survey (and the Auto Credit grade) does not reflect the many individuals who take out single or installment payment auto title loans on their vehicles, which can have effective annual rates as high as 300 percent. These types of loans are prohibited or have a restrictive interest rate cap in many states.

Experian Automotive notes the following about purchases of new vehicles by loan or lease in the second quarter of 2016:

Second Quarter 2016 Vehicle Purchases

Average Loan

Amount

New Car Used Car New Leased Car

$29,880 $19,101

N.A.

Average Loan (or Lease) Monthly Payment

$499

$364

$404

Average Loan or Lease Term

68 months 63 months

36 months

Average Interest

Rate

4.82% 8.97%

N.A.

Average Interest Rate

for Below Prime Credit

Purchases

6.5% to 13.4%

9.8% to 19.3%

N.A.

The Center was unable to obtain state-specific data on auto leasing. Experian Automotive notes that new car leases hit a new high in the second quarter of 2016 at 31.44 percent of all new vehicles sold. Sadly, state data does not exist on leasing--so the Auto Credit grade in this report is unable to give a total picture of auto financing. Due to this lack of leasing data, the Auto Credit grade only allocates a 10 percent weighting to the data point measuring the percent of adults who have an auto loan. The three other data points in the Auto Credit grade are each given an equal weighting of 30 percent.

2016 adult financial literacy report -- 60

The states with the best and worst Auto Credit grades are listed below:

Top 10 States Massachusetts Hawaii Connecticut California New York Rhode Island Washington Iowa New Hampshire Alaska

Bottom 10 States Texas Georgia New Mexico South Carolina Arkansas Alabama West Virginia Oklahoma Louisiana Mississippi

The Auto Credit subcategory grade consists of the weighting of the following four data points as indicated above:

Auto Loan as a Percent of Household Income:

Best State -- New Jersey: 21.4%

U.S.: 33.8%

Worst State -- Arkansas: 51.8%

Auto Loan Delinquencies or Auto Loans That Are More Than 60 Days Past Due:

Best State -- Oregon & Washington (tied): 0.58%

U.S.: 1.12%

Worst State -- Louisiana: 2.25%

Percentage of Adults With Auto Loans: Best State -- New Jersey: 21.68%

U.S.: 30.42%

Worst State -- Delaware: 42.09%

Percentage Difference in Auto Insurance Premiums Between Someone Without a Credit Score and Someone With an Excellent Credit Score:

Best State -- California, Hawaii & Massachusetts (tied): 0%

U.S.: 53%

Worst State -- Michigan: 122%

2016 adult financial literacy report -- 61

Credit

Auto Credit

ABCDF

14% 48% 20% 16% 2%

Auto Loan Balance as a Percent of

Household Income

Auto Loan Delinquency Rate

Percent with Auto Loans

Increase in Auto Insurance Premiums Due to Bad Credit

2016 adult financial literacy report -- 62

grading summary

Auto Credit

Auto Loan as Percent of Household Income

weighting

0.3

Alabama

D

Alaska

B

Arizona

C-

Arkansas

F

California

B+

Colorado

B

Connecticut

A+

Delaware

B+

Florida

C

Georgia

C-

Hawaii

A-

Idaho

C

Illinois

B

Indiana

B-

Iowa

B-

Kansas

C+

Kentucky

C

Louisiana

D-

Maine

B

Maryland

A

Massachusetts

A+

Michigan

A-

Minnesota

A

Mississippi

F

Missouri

C+

Montana

C-

Nebraska

B

Nevada

C

New Hampshire

A

New Jersey

A+

New Mexico

F

New York

A-

North Carolina

C-

North Dakota

B-

Ohio

B

Oklahoma

D

Oregon

B-

Pennsylvania

B+

Rhode Island

A

South Carolina

C-

South Dakota

C+

Tennessee

D+

Texas

D

Utah

B+

Vermont

B+

Virginia

A-

Washington

B

West Virginia

D-

Wisconsin

B+

Wyoming

C

United States

B-

grading summary: Auto credit 1 of 2

States Alphabetically

Auto Loan Delinquencies

Percent with Auto Loans

Impact of Auto Insurance Premiums

on Credit Scores

0.3

0.1

0.3

D+

B-

C+

A-

D+

A-

B

B-

C

C

D+

B+

A-

B+

A+

B+

C+

C

A-

B+

A-

C+

F

C+

B+

B

B

C

B

C

A

A-

A+

A

C+

B+

B+

B-

B-

B

B-

B

A

D+

A

B+

C-

B+

C+

B-

C+

F

D+

A-

A

D

B

B-

C

B

A

B

A+

B-

B

F

A+

B-

C

F

C

C-

B-

C-

C

A-

C-

B+

A

C+

B-

B

B

B-

A+

F

B-

A

A+

D

C-

B-

A-

A-

A

B+

B-

B-

B

A

D

B

B

C+

C+

C-

D

B

A+

B+

C

A-

B-

C

A

B-

B

C

C

C

A-

D

B

B-

B+

C-

C+

B-

B-

A

D

B

A

D-

B+

B+

C

C-

A+

B+

B-

C

D

B-

A-

C+

C

B

D-

C+

B

B-

B-

Average Auto Credit

Grade

Adjusted Linear Curve Grade

72.53 88.07 77.80 72.99 93.22 82.90 93.71 79.33 82.08 74.43 94.86 85.30 84.31 83.74 88.86 84.43 76.65 68.72 85.89 86.67 96.98 77.09 87.93 63.26 77.42 83.44 84.99 80.44 88.51 88.02 74.43 91.52 80.31 84.64 83.03 71.88 86.09 84.47 90.53 74.10 83.29 76.14 75.57 86.63 87.66 83.29 89.50 72.47 85.10 77.52 82.34

67.37 88.11 74.40 67.98 94.98 81.21 95.64 76.45 80.12 69.91 97.17 84.41 83.09 82.33 89.16 83.25 72.87 62.29 85.20 86.24 100.00 73.46 87.92 55.00 73.90 81.93 84.00 77.93 88.70 88.04 69.91 92.71 77.75 83.53 81.38 66.50 85.47 83.31 91.39 69.47 81.73 72.19 71.43 86.19 87.56 81.73 90.02 67.29 84.15 74.03 80.46

Summary Grade

D+ B+ C D+ A BA C BD+ A+ B B BB+ B CDB B A+ C B+ F C BB C+ B+ B+ D+ AC+ B BD B B AD+ BCCB B+ BAD+ B C B-

2016 adult financial literacy report -- 63

grading summary

Auto Credit (continued)

Massachusetts Hawaii Connecticut California New York Rhode Island Washington Iowa New Hampshire Alaska New Jersey Minnesota Vermont Maryland Utah Oregon Maine

Idaho Wisconsin Nebraska North Dakota Pennsylvania Kansas Illinois Indiana Montana South Dakota Virginia Ohio Colorado United States Florida Nevada North Carolina Delaware Arizona Wyoming Missouri Michigan Kentucky Tennessee Texas Georgia New Mexico South Carolina Arkansas Alabama West Virginia Oklahoma Louisiana Mississippi

States BY GRADE

Average Auto Credit Grade

Adjusted Linear Curve

Grade

96.98 94.86

100.00 97.17

93.71

95.64

93.22

94.98

91.52

92.71

90.53 89.50

91.39 90.02

88.86

89.16

88.51

88.70

88.07

88.11

88.02 87.93

88.04 87.92

87.66

87.56

86.67

86.24

86.63

86.19

86.09 85.89

85.47 85.20

85.30 85.10

84.41 84.15

84.99

84.00

84.64

83.53

84.47

83.31

84.43 84.31

83.25 83.09

83.74

82.33

83.44

81.93

83.29

81.73

83.29 83.03

81.73 81.38

82.90

81.21

82.34 82.08

80.46 80.12

80.44 80.31

77.93 77.75

79.33

76.45

77.80

74.40

77.52

74.03

77.42 77.09

73.90 73.46

76.65

72.87

76.14

72.19

75.57

71.43

74.43 74.43

69.91 69.91

74.10

69.47

72.99

67.98

72.53

67.37

72.47 71.88

67.29 66.50

68.72

62.29

63.26

55.00

grading summary: Auto credit 2 of 2

Summary Grade

A+ A+ A A AAAB+ B+ B+ B+ B+ B+ B B B B

B B B B B B B BBBBBBBBC+ C+ C C C C C CCCD+ D+ D+ D+ D+ D+ D DF

2016 adult financial literacy report -- 64

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