Americans falling behind on auto loan payments at record pace
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A growing number of Americans are falling behind on their car payments, an ominous sign for the U.S. economy as high auto prices and stubborn inflation strain household budgets.
Car repossessions tumbled in the early days of the pandemic as the government sent trillions in stimulus money to American homes and businesses. But repossessions have progressively ticked higher as sky-high prices for used and new cars alike forced consumers to take out bigger loans.
In September, the percentage of auto borrowers who were at least 60 days late on their bills rose to 6.11%, according to a Fitch Ratings report obtained by FOX Business. That marks the highest default level in nearly three decades and is a notable increase from the previous record of 5.93% in January.
CREDIT CARD DELINQUENCIES ON UPSWING
Rapidly rising interest rates have compounded the pain of higher car prices. (Kena Betancur / VIEWpress / File / Getty Images)
Bloomberg first reported the news.
The high number of loan delinquencies has not yet led to an equivalent growth in defaults, according to separate data published by Cox Automotive. Although it indicated that loan delinquencies rose for the fifth straight month in September, defaults actually slid 9.8% for the month. Still, defaults are 31.7% from the same time one year ago.
Unsurprisingly, vehicle repossessions are also expected to climb in coming months. Cox Automotive estimates that 1.5 million vehicles will be seized by the end of 2023, up from 1.2 million last year. That remains below the typical pre-pandemic level.
HOW HIGH INTEREST RATES ARE
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