‘Alarming’ move has Aussies $5bn in debt

Aussies are racking up bigger debts than ever before due to an obsession with one major industry and if things get much worse it could plunge us into a huge financial crisis.

Australians have borrowed more than $4.9 billion in new car loans for the June 2025 quarter, according to the Australian Bureau of Statistics.

New figures show buyers are signing up for bigger debts than ever before.

Money.com.au reports the average new car loan in Australia is $46,583, with typical monthly repayments of $703.

Fitch Ratings reported that arrears on Australian auto loans rose to 1.36 per cent in late 2023, up from 1.19 per cent earlier that year.

At the same time, the Federal Chamber of Automotive Industries (FCAI) said new car prices have soared to nearly 30 per cent since 2019.

Credit agency Moody’s has also warned that defaults are likely to increase as further cost-of-living rises.

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In the US, drivers now owe a record US $1.66 trillion in auto loans and arrears. Picture: Supplied

The concern is that Australia could follow the US, where the auto industry is already in meltdown, with record debt, collapsing lenders and declining trade-in values.

Around 80 per cent of Aussies who buy a new car, take out finance to do so.

The Consumer Federation of America (FCA) is concerned about a repeat of the 2008 financial crash.

Last month, FCA revealed that US drivers owe more than US$1.66 trillion (AUD $2.56 trillion) in car loans.

FCA warned that borrowers are now falling behind rates worse than before the pandemic and more in line with the years just before 2008.

“Delinquencies, defaults, and repressions have shot up in recent years and look alarmingly similar to trends that were apparent before the Great Recession,” the report said.

Analysts believe increases in prices, negative equity, and tariffs are the key triggers.

Car prices are becoming less affordable every month. Figures from Edmunds show the average price of a new car in the US is US$50,469 (AUD $77,500) in August, up 2.6 per cent on a year earlier.

The transaction price was also high at US $48,365 (AUD $74,300).

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Analysts warn Australia could face the same affordability crunch as US households struggle with debt. Picture: Supplied

According to Edmunds, more than one in five used trade-ins at the end of 2024 carried negative equity of US$10,000 (AUD $15,400) or more.

Edmunds head of insight, Jessica Caldwell, said small shortfalls were common, but the scale of the losses was concerning.

“Consumers owning a grand or two more than their cars are worth isn’t the end of the world, but seeing such a notable share of individuals at the $10,000 or even $15,000 level is nothing short of alarming,” she said.

Additionally, average loan balances sit above US $41,000 (AUD $63,000), monthly repayments are around US $745 (AUD $1145) and more than 1.6 million cars were repossessed last year.

Boston Consulting Group global automotive lead Felix Stellmaszek said tariffs and supply chain shocks were forcing a permanent reset.

“This may well be the most consequential year for the auto industry in history, not just because of immediate cost pressure, but because it’s forcing the fundamental change in how and where the industry builds,” he said.