What car to buy!Americans can’t pay off their car loans, delinquency rates are higher than the peak of the financial crisis
Under global inflation, Americans are having a hard time, consumption has turned red, and car loans can’t be repaid….
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.
Soaring used car prices have forced buyers to take out more loans for their vehicles amid the coronavirus pandemic. In an era of government stimulus checks, a tight labor market and a soaring stock market, monthly loan payments may seem like a no-brainer. But things have changed for many as inflation eats into consumer budgets and the job market cools.
More Americans are now delinquent on their auto loans in the United States than during the financial crisis. 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, according to Fitch Ratings. 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.
Auto auction company Manheim will repossess 11% more cars in 2022 than the previous year, but still down 26% from 2019.
When a lender’s car is repossessed varies by state, but according to the FTC, in many cases it happens whenever a borrower defaults—that is, doesn’t make payments on time. Usually, the car is repossessed after the owner fails to pay on time two or three times.
Once the vehicle is repossessed, the borrower’s credit score is affected and it stays on the credit report for up to seven years. This is especially unfavorable for those young people who have just entered the society. They have just started working and their credit scores are lower than those who have worked for many years. Once there is a problem with the loan, their credit score will only be lower, making it difficult for them .