Americans Are Falling Behind On Auto Loans at an Alarming Rate
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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- Jalop1991 I expected a COMPLETELY different article.
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Imagine thinking the stimulus checks did anything more than pay for 3 weeks of living expenses out of a 2-year period
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?