As Potential Used Car Buyers Seek 28% More in Financing, Consumers Turn to Older Models

In ordinary times, consumers shopping for a car may head straight to a used vehicle lot to save money. The coronavirus pandemic has impacted nearly every field for better or worse, and the auto industry hasn’t been spared. Increased demand for cars and a disrupted supply mean shoppers can no longer expect to find a bargain on a used vehicle.

As a result, shoppers may need to take on larger auto loans or settle for older models. Researchers examined auto loan inquiries on the LendingTree platform and found that the average amount of financing sought on a two-year-old vehicle rose by 28.3%, or $5,176, between the second quarters of 2020 and 2021. Further, the average age of a used vehicle for which consumers sought financing jumped 21.1% to seven years old in the same period.

Researchers culled anonymized data from 600,000 LendingTree auto loan inquiries to find where shoppers are buying older cars — and how much they’re seeking to borrow for them.

Key findings

• Consumers are seeking to take out larger auto loans than last year. The average amount of financing sought on a two-year-old vehicle rose by 28.3%, or $5,176, between the second quarters of 2020 and 2021.
• Madison, Wis., saw the biggest jump in financing amounts for two-year-old vehicles between 2020 and 2021 (regardless of make or model). Average financing inquiries here rose by 45.5%, or $7,575. Madison was followed by Rochester, N.Y. — 35.6% increase, or $7,112 — and Chattanooga, Tenn. — 32.4% increase, or $6,383.
• The average age of used vehicles for which consumers sought financing on LendingTree jumped 21.1% between 2020 and 2021. Consumers hoped to buy used models that were 5.8 years old in 2020, but that rose to seven years old in 2021. The average age for vehicles rose in more than half of the 98 largest U.S. metros examined.
• Residents in New Orleans inquire about buying the oldest used cars, at an average of 16.2 years old. New Orleans also saw the largest increase — 153.1%, or 9.8 years — in average used vehicle age between 2020 and 2021. Car buyers in Miami aimed for younger models at an average of 4.7 years old — youngest of the metros analyzed.

Bigger price tags mean more financing sought

As used car prices have increased, consumers are seeking higher auto loan amounts. From the second quarter of 2020 to the second quarter of 2021, the average amount on loan inquiries on two-year-old vehicles increased by 28.3%, or $5,176.

In four of the largest U.S. metros, the amount of financing sought on auto loans rose at a rate higher than the national average between 2020 and 2021. Car shoppers in Madison, Wis., may be wishing they purchased cars earlier, as average loan amounts requested rose by $7,575.

The amounts that shoppers requested went up significantly across make, model and car type, but those looking for certain models may have found themselves in need of bigger loans than expected. One of the most popular vehicle models on the LendingTree platform saw financing amount requests jump by 81.8% in the past year.

Turning back time to find affordable cars

The rise in financing inquiry amounts, plus the shrinking supply, may suggest consumers are seeking older models due to availability and affordability. Between the second quarters of 2020 and 2021, the average age of used vehicles for which LendingTree users sought financing rose 21.1% from 5.8 years old to 7.

The majority of the 98 largest U.S. metros saw average used car ages rise, with ages increasing in 53 metros, remaining the same in four and falling in 41.

The average age of used cars shoppers looked to buy rose as much as 153.1% in the metro with the biggest age hike. Car buyers in New Orleans in 2021 sought vehicles nearly 10 years older on average than they did in 2020, helping the Big Easy rank as the metro that buys the oldest cars at 16.2 years.

Two other metros — Knoxville, Tenn., and Cleveland — also saw average used car ages more than double:

The metros that buy the oldest used cars closely mirror those that saw the biggest increase in age over the past year.

Milwaukee just overtakes Detroit, buying used cars just slightly older than the Motor City, while Seattle trumps Las Vegas. Denver joins the top 10 with consumers seeking cars slightly older than in Wichita, Kan. — despite Wichita seeing a bigger jump in ages.

Floridians evidently may prefer newer cars, with two of the three metros with consumers buying the youngest used vehicles hailing from the Sunshine State, including Miami, where consumers buy the youngest used cars overall at an average of 4.7 years.

Orlando and Houston follow with residents seeking to purchase cars that are an average of 5.1 years old in each metro.

When it comes to the most popular models on the LendingTree platform, the average age of used Chevrolet Tahoes made the biggest jump — 4.1 years — from 2020 to 2021 compared to other similarly popular types of cars consumers sought to purchase. On the contrary, car buyers shopping for Toyota Camrys sought similarly aged vehicles this year compared to last year.

Shopping for a car? Get your expectations in gear

While the coronavirus pandemic has created a fairly unique situation for the autos market, LendingTree autos expert Jenn Jones says consumers can expect some of the impacts to last for years to come.

“Greater demand for used cars will continue beyond the pandemic,” she says. “Almost every auto manufacturer made production cuts over the last year, and the microchip shortage kinked the supply chain this summer. The lack of new cars drives prices up across the market.”

For consumers who can’t wait to get a better picture, Jones has some tips to save if you head to a dealer.

• Shop online. Not only can the online car-buying experience keep shoppers safer than shopping in person as the pandemic continues, but it’s an easier way to compare prices rather than visiting multiple dealerships.
• Take a holistic view when it comes to the price. Jones says sellers often try to keep the buyer focused on the monthly car payment, but beware. Make sure you’re not overpaying for your new vehicle or being undersold on your trade-in. Check with industry guides Kelley Blue Book, Edmunds and NADAguides before you shop.
• Don’t accept the first offer. When it comes to financing your car, Jones warns against accepting a dealer’s APR offer. “Dealers can often inflate consumer APRs by two percentage points,” she says. She suggests seeking a loan offer, especially a preapproval from a lender like your bank and then asking the dealer to beat this rate. Be sure to compare auto loan rates at LendingTree to find your best offer available.

Methodology

Analysts reviewed more than 600,000 anonymized online loan inquiries for auto loans on the LendingTree platform for vehicles that were at least a year old during April to June 2020 and April to June 2021 to determine the average vehicle age during those periods, both nationally and for the 98 largest metropolitan areas in the U.S.

Additionally, researchers calculated the average loan amounts requested for all two-year-old vehicles and five of the most popular models on the LendingTree platform during those periods.

All figures represent preliminary consumer financing interest and don’t purport to be final transaction costs.