By Natalie DeCoste
When the pandemic started, consumers tightened their purse strings and slowed their spending. With COVID restrictions lifting, Americans are borrowing once again, now at decade-high levels.
According to credit-reporting firm Equifax, consumer demand for auto loans and leases, general-purpose credit cards, and personal loans was up 39% in April compared to the same period last year. While comparisons to 2020 numbers show a steep increase because of reduced spending during the early days of the pandemic, the report also reveals that demand was up 11% compared with April 2019.
Lenders originated roughly three million auto loans and leases in March, up about 53% from the same month in 2020. This is the highest monthly figure on record, according to Equifax.
Auto balances for new originations also hit a record of $73.6 billion in March, up 59% from a year ago. The total outstanding balances on auto loans and leases have increased 1.8% year-over-year to $1.396 trillion.
The data put together by Equifax measures how often lenders checked consumers’ credit reports to make loan decisions. The company reported that lenders extended a record high number of auto loans and leases in March, the latest month for which data is available. Data from the firm goes back to 2010.
Lenders also increased credit card originations. The lending companies issued more general-purpose credit cards in March 2021 than any other March on record.
Equifax also released insights on the current amount of consumer debt. According to the company, total U.S. consumer debt is $14.58 trillion, an increase of 2.7% from a year ago. Of that debt, mortgage debt, which includes home equity loans, accounts for 71.8% of total debt at $10.46 trillion.
Auto loans and leases also make up a greater share of non-mortgage debt than in the past. In March 2021, 33.9% of non-mortgage consumer debt was from auto loans and leases, up from 29.4% a decade ago.
The increase in lending signals that some consumers are less concerned about the pandemic’s impact on their financial state. Many consumers did not want to spend money when they were worried about getting laid off, while others were stuck at home and therefore had nothing to buy. Many did not need to borrow because stimulus checks, expanded unemployment benefits, and a surging stock market grew their checking accounts.
“There’s a significant increase in consumer-credit demand and a growing appetite to use credit on things like those vacations that were postponed for 18 months,” said Tom Aliff, senior vice president of analytics consulting at Equifax.
Increased prices have also factored into the increased need for loans, especially for cars and trucks. Prices for new vehicles have soared due to a computer-chip shortage that has hindered car production, and demand for personal vehicles increased as people kept away from public transportation. Even used vehicles are more expensive due to low supply across the country.
Consumer lending is set to continue growing in the coming months as people exhaust the last of their stimulus checks and turn back to credit cards. The increase in borrowing and spending will help drive economic recovery in the U.S., which is still not back to its pre-pandemic state.
“The U.S. consumer is poised to lead the economic recovery across the country,” said Brendan Coughlin, head of consumer banking at Citizens Financial Group Inc., who expects consumer lending to grow for the next 12 to 24 months.
