Americans Fall Behind on Car Payments at Highest Rate in Decades

[mahatmakanejeeves]

WealthDebt & Savings
Americans Fall Behind on Car Payments at Highest Rate in Decades

Delinquencies on auto loans among subprime borrowers are spiking as consumers continue grappling with higher interest rates.

Bloomberg
By Claire Ballentine
March 6, 2025 at 10:00 AM EST

{snip}

[progree]

1. Some more from Bloomberg article on auto loan delinquencies -

Last edited Fri Mar 7, 2025, 08:42 AM - Edit history (2)

https://archive.is/w8e7S

In January, the share of subprime auto borrowers at least 60 days past due on their loans rose to 6.56%, the most since the data collection began in 1994, according to Fitch Ratings. . . . Auto loans have been a particular pain point, with higher car prices and elevated borrowing costs driving a surge in repossessions. . . .

The Federal Reserve Bank of New York recently reported that the share of auto loans among all borrowers that transitioned into serious delinquency — defined as 90 days or more past due — rose to 3% in the fourth quarter, the highest level since 2010.

Fitch defines subprime auto borrowers as those with credit scores of 640 and below. Those with higher scores are faring better — 0.39% of prime borrowers were at least 60 days past due in January, up from 0.35% a year prior.

The below is the 60 day delinquency rate of subprime auto loans



# Interesting that it was quite high pre-pandemic, in the supposedly golden age part of tRump's first term.
# Also interesting that it fell, and fell a lot with the pandemic. (the stimulus payments and other enhanced safety-net measures really did help a lot with some lower income groups, along with student loan payment suspension and eviction suspensions, allowing people to focus on other bills and other loans)
# And then reached near record levels again in the pre-election months, showing that the economy wasn't working out for a lot of people even though a lot of us were saying, pre-election, that the economy was great -- look at the jobs numbers, and inflation is below 3% and wages are keeping up and blah-de-blah

The article mentions that loan delinquency rates are highest in January and February (because of prior holiday spending) and improve in March and April as many borrowers use tax refunds to catch up on their bills and loans.

[bucolic_frolic]

2. grappling with higher interest rates - are there auto loans with floating rates?

I understand the cost of everything rises, but the article seems to imply people can't make payments because of rising rates?

[MichMan]

3. Nearly 1 in 5 are making payments of $1,000 or more

It’s becoming increasingly expensive to buy a new car.

In fact, a record number of new-car buyers — nearly 1 in 5 — are making payments of $1,000 or more, according to Edmunds. For a household earning the U.S. median income of $80,610, a $1,000 car payment would take up 15% of pre-tax income, before factoring in the cost of insurance, gas or maintenance.

https://www.cnbc.com/2025/03/08/a-new-car-costs-nearly-50000-heres-how-much-youd-pay-per-month.html?&qsearchterm=A%20new%20car%20costs%20nearly%20$50,000%20on%20average:%20Here%E2%80%99s%20how%20much%20you%27d%20pay%20per%20month