Car Loan Delinquencies on the Rise

Car loan delinquencies have been rising. Key factors include termination of loan relief programs post pandemic, rising inflation, higher interest rates, and higher used and new car prices, which have resulted in extended payments on car loans. According to Cox Automotive, the average cost of a new car reached $47,148 as of May 2022. This is a 13.5% increase from the average cost only one year ago, in May 2021.   According to TransUnion data, 4.35% of car owners ages 18 to 40 were at least 60 days late on their auto loans in early 2022. In 2019, before the pandemic began, Gen Z had a past-due rate of 1.75%. Today, past-due rates have reached as high as 2.21% among Gen Z car owners. Similarly, millennials now show increased past-due rates of 2.14%, compared with 1.66% before the pandemic. 

The percentage of subprime auto borrowers who are at least 60 days past due on payments rose to 5.67% in December from a seven-year low of 2.58% in April 2021. That compares with the peak of 5.04% in January 2009 during the financial crisis. 

Higher interest rates make it harder for Americans who borrow to buy cars to make monthly payments. The average new-car loan rate was 8.02% in December, up from 5.15% in the same period in 2021, according to Cox Automotive. Interest rates for subprime borrowers can be much higher, with some even paying over 25% on their car loans. 

Source: breakinglatest.news