Auto Loan Delinquencies Hit 13-Year High As Monthly Car Payments Get Bigger

Hey there, rev your engines and buckle up because we’re diving into a turbocharged topic: the state of auto loans in the U.S. Buckle up because the ride gets bumpy.

According to Federal Reserve Bank of New York data, many car owners struggle to keep up with their auto loan payments. In the last quarter, the rate of borrowers falling behind by a month or more hit 7.7%, the highest since 2010. What’s fueling this trend? Well, a combination of skyrocketing vehicle prices during the pandemic and the Federal Reserve’s recent efforts to curb inflation by hiking interest rates.

Now, here’s where it gets interesting. Despite a slight price dip, the average monthly payment for a new car loan hit a record high of $623. That’s not all. Interest rates on auto loans for new and used cars climbed, reaching 9.2% for new cars and a staggering 13.8% for used ones. Ouch.

But who’s feeling the pinch the most? Lower-income borrowers seem to bear the brunt, with delinquencies rising fastest in areas with lower income levels. And it’s not just auto loans; younger borrowers, especially those in their thirties grappling with student loan debt, are also finding it harder to keep up with credit card payments.

While the current level of auto delinquencies isn’t ringing alarm bells for the economy yet, experts advise keeping a close eye on the trend, especially given the additional financial strain on borrowers with student loans. As required payments on federal student loans resume, the pressure could mount further for many in this age group………[read more]

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How do shifting trends in auto loans, like rising delinquency rates and increasing monthly payments, impact the broader economy, particularly concerning consumer spending and financial stability?

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