Report: Auto Loan Rejections Are Up and Poised to Keep Increasing

With dealer lots starting to fill back up with product after years of lean inventories that encouraged salespeople to ask for absolutely ludicrous prices, the Federal Reserve has found that lenders are declining would-be borrowers at a record-setting pace. 

The reasons for this are many. Annual percentage rates have come up, requiring consumers to pay more money over time that lenders just aren’t certain they’ll see a return on. More people are also defaulting on loans across the board and inflationary pressures are poised to make the issue worse since the dollar just doesn’t go as far as it used to.  


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Car Loan Delinquencies Keep Increasing, Who Is to Blame?

Not that you couldn’t have figured this one out all by yourself, but car loan delinquencies are reaching record levels once again. The culprits are the usual suspects. Wages have failed to keep pace with inflation for a couple of generations, current inflation rates are at record highs, and those loan-accommodation programs set up during the pandemic are all expiring now. Basically, regular people are becoming broke so they’re starting to be forced into tough financial decisions – including whether to make their car payments against heating their homes or feeding their families.

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It's Not Just Pricing, Auto Loans Are Also Getting Out of Hand

As you’re undoubtedly aware, now isn’t the best time to purchase a new vehicle. While you can currently sell your ride for more than it’s realistically worth, the economy is anything but stable as inflation and supply shortages gum up the works. A lack of semiconductor chips has caused the automotive industry to stutter endlessly throughout 2021, with the issue getting so bad that some manufacturers have been building unfinished vehicles just to give their employees something to do. Ford is even mulling over a strategy to ship those units directly to dealerships so they’ll have something on the lot — effectively making its retail network responsible for final assembly.

But the logistics nightmare is only part of the story. Automotive loans are also becoming untenable as terms stretch out endlessly. Cars continue getting more expensive and the average consumer is losing their buying power. The preferred solution is for financiers to extend agreements so customers can continue making the same monthly payments while accruing more on interest over the duration. While effective in the short term, and bound to make banks money as we’re all driven deeper into debt, one wonders how this plays out on a grander scale.

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Auto Loan Growth Continues, Chamber Of Commerce Calls For Lending Rules
  • TCowner We've had a 64.5 Mustang in the family for the past 40 years. It is all original, Rangoon Red coupe with 289 (one of the first instead of the 260), Rally Pac, 4-speed, factory air, every option. Always gets smiles and thumbs ups.
  • ToolGuy This might be a good option for my spouse when it becomes available -- thought about reserving one but the $500 deposit is a little too serious. Oh sorry, that was the Volvo EX30, not the Mustang. Is Volvo part of Ford? Is the Mustang an EV? I'm so confused.
  • Mikey My late wife loved Mustangs ..We alway rented one while travelling . GM blood vetoed me purchasing one . 3 years after retirement bought an 08 rag top, followed by a 15 EB Hard top, In 18 i bought a low low mileage 05 GT rag with a stick.. The car had not been properly stored. That led to rodent issues !! Electrical nightmare. Lots of bucks !! The stick wasn't kind to my aging knees.. The 05 went to a long term dedicated Mustang guy. He loves it .. Today my garage tenant is a sweet 19 Camaro RS rag 6yl Auto. I just might take it out of hibernation this weekend. The Mustang will always hold a place in my heart.. Kudos to Ford for keeping it alive . I refuse to refer to the fake one by that storied name .
  • Ajla On the Mach-E, I still don't like it but my understanding is that it helps allow Ford to continue offering a V8 in the Mustang and F-150. Considering Dodge and Ram jumped off a cliff into 6-cylinder land there's probably some credibility to that story.
  • Ajla If I was Ford I would just troll Stellantis at all times.