Americans Are Overdue With Their Car Payments At Highest Rate In Nearly 30 Years

I realize car prices have increased like crazy but I'm still shocked at what some of my young coworkers are willing to pay. If you haven't even built up any savings yet, then maybe buying a truck that is more than 50% of your annual income is a bad idea.

 

What a cluster the car market is and will likely continue to be. The supply distribution in cars rockets prices and increases demand for both used cars and parts as more look to keep their old car on the road.

Mechanics are backed up and still don't have immediate access to all parts compounding issues for those looking to be prudent or just get by.

And there's nothing to be done about the "skinny belly of the snake". There will be less supply of used cars for a long time.

 

WOW! That's just crazy...

 

The average price of a new car is pushing $50,000, the median household income is $75,000. What could go wrong?

The Average New Car Price Is Unbelievably High.

 

That’s crazy. I wish they would report median new car price, as they are doing for income here. I am sure the median would be lower than the mean, but I’m not sure by how much since I can’t find this value published anywhere.

 

I had to buy a used work truck 2 months ago, one of ours kicked the bucket. Even with pristine credit I had to beat them down on interest and got to 9.89%, which is bonkers.

 

I checked my credit union's website . The used car loan rates ranged from 6.24% for a 36-month loan to 8.74% for a loan of up to 84 months. I suspect that source used by the OP was for loans arranged through car dealerships which tend to be higher (sometimes considerably higher) than those from banks or credit unions. Adding the caveat that those were the best rates offered by the CU even adding a couple of percentage points to the advertised rates the rates would still be considerably lower than the supposed average of 13.5% for borrowers with good credit.
New and Used Auto Loans | Agriculture Federal Credit Union

 

Quick! Change subject to China collapsing!

 

This was Fitch 60 days ago. What does their new release say as I didn’t see one? Forbes is paywall and I dont pay for that conservative hack site.

To be clear it is an MSN article quoting a Forbes article referring a Fitch article.

https://www.fitchratings.com/resear...deterioration-likely-with-downturn-23-08-2023

Delinquencies increased from historically low levels during the pandemic, peaking earlier this year, but have since declined due to seasonal factors. Annualized net losses (ANL) and recoveries hit their worst post-pandemic levels in February before mild seasonal rebounds. Originators have recently tightened underwriting standards, which may support better 2023 vintage performance relative to 2022 vintage deals.

Subprime delinquencies are consistent with pre-pandemic levels, matching the August 2019 peak of 5.93% in January 2023, but have since dropped 0.62% to 5.31% in July. This compares with delinquencies of 4.56% in January 2022 and 4.71% in July 2022, although seasonal changes have improved in 2023, with declines greater and increases lower than last year.

 

Looks like a 6.1% vs a 5.93% in August 2019. That would be 2-3% more people behind their payments with a loan rate over twice as high. Doesnt seem surprising.

Found this from Fitch too:

Fitch is forecasting a mild recession beginning in 4Q23 and heading into 2024, in which we could see an uptick in delinquencies and losses. Recession-driven increases to unemployment in addition to disposable income pressure from inflation, higher interest rates and the resumption of student loan payment obligations may negatively affect subprime loan performance, even for newer deals with recent conservative underwriting adjustments.

Borrowers’ prioritization of auto loan payments and relatively low unemployment, which we expect will remain in line with the historical average in a mild recession, should help lessen pressures on asset performance. Subprime auto ABS ratings are supported by conservative cumulative net loss proxies and protective structural features such as non-declining credit enhancement that builds as the transaction amortizes.

 

Just keep in mind that subprime lending is only a slice of the overall vehicle lending market - my google fu says around 15%. This subset is made up of riskier buyers: either those with poor credit or little/no credit history. Just want to make sure no one is interpreting this as saying ~6% of all vehicle loans are delinquent.

 

my credit union is 5.74% for 36 months up to 8.49% for 84 months. In november, right before COVID I got a 36 month loan for 0.9%...those were the days

 

I got a 48-month new car loan at 0.9% from the Pentagon Federal Credit Union back in 2015, the last time I purchased a car. I actually paid off the loan over a year early even though based strictly on the numbers I probably should have used the full 48 months.

 

True story: about 5 years ago I offered a graduating senior from a disadvantaged school a two door Honda with 150,000 miles on it that looked like hell but ran well. She had driven it a couple of times as I was helping her prepare for her driving test. She decided not to accept my offer of a free car. Why? She said the bank (that operated a credit union inside the high school) told her she was better off getting a car loan and establishing credit.

WOW!

Thinking on it now I should have had a conversation with the bank at that school on their "advice" to a young, 18-year old woman looking to get started in life. Still burns me.

 

I mean is that surprising? Student loans, Credit cards and now car loans for 18 year old. It used to be if you wanted to borrow someone else's money, you had to prove you had income to support a repayment. I guess those days are gone if 18 year olds are buying cars now.

 

I had no clue how bad it was until a month ago. I have been trying to help an employee who ended up with a 25.9% rate!? I tried to help get it refinanced as she had worked on her credit. But due to the age and mileage of the car we ran into barriers. I ignorantly figured a rate like that would be borderline illegal.

 

Agree, too many young people have been brainwashed into thinking that credit score is everything. Unfortunately it is for many. What a sham.

I had my ID stolen in late 2014. Out of precaution, Mrs Aging and I closed many credit cards that we weren’t using. In early 15 we offered to co-sign a car loan for our then 22 year old daughter and found out her credit score was higher than both ours and she had just graduated college, just got her first job, and was living at home.

I got so pissed that I wrote a check for the car and let her pay us back interest free. What a scam the banks have pulled with credit scores.

 

#Bidenomix

( ...I know..."not his fault"... LOL!)