US Consumers Are Falling Behind on Their Car Loans
US drivers are late on their car loan payments at the highest rates on record, and the trend might not go away anytime soon.
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The object that appears to be getting smaller in the rear-view mirror is your fortune.
US drivers are late on their car loan payments at the highest rates on record, and the trend might not go away anytime soon, Bloomberg reported.
Baby, Can I Drive My Car?
As if you needed reminding: Inflation is bad, student loan payments are back with a vengeance, and most of us have likely burned through any pandemic stimulus and savings at this point. Now that pain is being felt in paying for our SUVs, sedans, and station wagons.
As of September, 6.11% of subprime auto borrowers were at least 60 days past due on their loans, according to figures from Fitch Ratings. That’s the highest they’ve been since data was first collected in 1994. And with the Fed looking to keep interest rates steady — or even increase them again — in the foreseeable future, the percentage might go even higher:
- Subprime loans are given to people with credit scores between 501 and 600, and the average rates are 11.75% on new cars and 18.5% on used vehicles, according to Experian. On average, Americans are spending between $500 and $700 a month on car payments, and that doesn’t include insurance.
- This is a tough stressor to deal with for many Americans who rely on cars for commuting and grocery shopping. Not every city is Boston or Seattle, with its solid public transportation systems and bikeable streets. Just over 90% of US households own at least one car.
“The subprime borrower is getting squeezed,” Margaret Rowe of Fitch said. “They can often be a first line of where we start to see the negative effects of macroeconomic headwinds.”
When to Buy: While buying a car has always been a big, costly decision, timing matters. The Wall Street Journal reported that early April to early May are the best times to buy a car because people are newly flush with their tax refunds and dealerships are competing for business. With tax season still six months away, maybe now’s the time to invest in some comfortable walking shoes.