Americans Are Falling Behind On Auto Loans at an Alarming Rate

Chris Teague
by Chris Teague

The economy hasn’t tumbled into the massive recession that some predicted, but there are signs of trouble brewing in the automotive lending industry. At the end of last year, more subprime borrowers were 60 days or more behind on their auto loans than at any point since the Great Recession in 2009. 

Delinquent auto loans lead to repossessions, and the numbers bear that out. Auction company Manheim reported an 11 percent increase in repossessions last year, though it’s important to note that 2022’s numbers were still way down from just a few years before. The number of repossessions fell early in the pandemic as stimulus checks helped many Americans limp financially through unprecedented times.

A car repossession can unfortunately trigger many other hardships in a person’s life, and the growing number of repos can spell trouble for the economy. Losing a vehicle means losing transportation to work, access to services such as healthcare and food, and significant damage to the person’s credit report. 

Elevated new car prices are partially to blame here, as Americans are paying more than $42,000 on average. Interest rates have made the loans more expensive, and combined, the two factors mean that even a modestly priced new vehicle may have a ridiculous monthly payment. 

Using CarMax’s payment calculator, a $42,000 car purchased in Michigan with $2,000 down and a six-year term would have a $657 monthly payment at a 3 percent interest rate. The average new car interest rate was 5.16 percent in December, which increases that payment to $700 per month. That’s not a tremendous difference, but when eggs cost $8 in some places, it’s easy to see how the financial strain can add up. 

[Image: Virrage Images via Shutterstock]

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Chris Teague
Chris Teague

Chris grew up in, under, and around cars, but took the long way around to becoming an automotive writer. After a career in technology consulting and a trip through business school, Chris began writing about the automotive industry as a way to reconnect with his passion and get behind the wheel of a new car every week. He focuses on taking complex industry stories and making them digestible by any reader. Just don’t expect him to stay away from high-mileage Porsches.

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6 of 68 comments
  • IBx1 IBx1 on Feb 02, 2023

    Imagine thinking the stimulus checks did anything more than pay for 3 weeks of living expenses out of a 2-year period

    • See 3 previous
    • EBFlex EBFlex on Feb 03, 2023

      “Reminder: 25% of the national debt was incurred 2017-2020. And you were silent.”

      Proof? Link? Citation?

  • VoGhost VoGhost on Feb 03, 2023

    Source? You could find debt tallies on multiple sites if you were allowed to use google. If you were curious. If you wanted to know the truth. Here's one to get you started:

    Do you see how the debt at the end of 2016 was $19,573T, and at the end of 2020 it was $27,748? That difference of $8.175 Trillion is the debt the US took on due to Trump's disastrous tax cuts for the ultra wealthy and big corporations. And it is a quarter of the current debt, in constant dollars.

    Why is this so hard?

    • FreedMike FreedMike on Feb 03, 2023

      "Do you see how the debt at the end of 2016 was $19,573T, and at the end of 2020 it was $27,748? "

      Might want to familiarize yourself with the concept of fiscal year spending, which is finalized a year in advance. Trump's responsibility was from 2018 to 2021 (FY 2018-2021). The first budget Obama was responsible for was FY 2010, passed in 2009. And so on...

      But if you look at the debt run-up figures, no one in recent history even comes close to W. and Reagan - particularly the latter. A great deal of that '80s boom happened as the result of good old Keynesian spending. And Trump was definitely NOT a deficit hawk.

  • Stephen My "mid-level" limited edition Tonino Lambo Ferraccio Junior watch has performed flawlessly with attractive understated style for nearly 20 years. Their cars are not so much to my taste-- my Acura NSX is just fine. Not sure why you have such condescension towards these excellent timepieces. They are attractive without unnecessary flamboyance, keep perfect time and are extremely reliable. They are also very reasonably priced.
  • Dana You don’t need park, you set auto hold (button on the console). Every BMW answers to ‘Hey, BMW’, but you can set your own personal wake word in iDrive. It takes less than 5 minutes to figure that that out, btw. The audio stays on which is handy for Teams meetings. Once your phone is out of range, the audio is stopped on the car. You can always press down on the audio volume wheel which will mute it, if it bothers you. I found all the controls very intuitive.
  • ToolGuy Not sure if I've ever said this, or if you were listening:• Learn to drive, people.Also, learn which vehicles to take home with you and which ones to walk away from. You are an adult now, think for yourself. (Those ads are lying to you. Your friendly neighborhood automotive dealer, also lying to you. Politicians? Lying to you. Oh yeah, learn how to vote lol.)Addendum for the weak-minded who think I am advocating some 'driver training' program: Learning is not something you do in school once for all time. Learning how to drive is not something that someone does for you. It is a continuous process driven by YOU. Learn how to learn how to drive, and learn to drive. Keep on learning how to drive. (You -- over there -- especially you, you kind of suck at driving. LOL.)Example: Do you know where your tires are? When you are 4 hours into a 6 hour interstate journey and change lanes, do you run over the raised center line retroreflective bumpers, or do you steer between them?
  • Mike Bradley Advertising, movies and TV, manufacturing, and car culture have all made speeding and crashing the ultimate tests of manhood. Throw in the political craziness and you've got a perfect soup of destruction and costs.
  • Lou_BC Jay Leno had said that EV's would be good since they could allow the continued existence of ICE cars for enthusiasts. That sentiment makes sense. Many buyers see vehicles as a necessary appliance.