More And More Americans Are Struggling To Pay Their Auto Loans | Carscoops carscoops
. “It leaves fewer dollars in their pocket to make the auto loan payment, because they’ve got to pay more for eggs and milk and other things.”The consumers feeling the biggest impact are subprime borrowers, who have lower credit scores and, often, lower income. The sudden rise in delinquencies may also be related to the end of some loan accommodation programs set up during the pandemic that were designed to help provide relief for vehicle owners who might have lost their job during the pandemic.
“There has been this effect where the delinquency that may have occurred over the last few years is really just pushed out or delayed because that consumer didn’t have to make payments or their status was on an accommodation. So now some of those are hitting,” said Merchant. In addition, the prices of new vehicles have been very high. Automakers struggled to build new vehicles during the pandemic, but demand remained strong, causing prices to go up, and dragging the pricesup with them. That may be adding pressure on people who took out a loan to buy a car.
Merchant argued that the loan market is still healthy despite the signs. With unemployment rates low, delinquency rates have been kept in check. But if that changes,“If we get into a position where employment starts to be a challenge in the United States and unemployment increases, that is when the industry will really start to be concerned about a consumer’s ability to pay their auto loans,” said Merchant.
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