Record Numbers of Americans Behind on Their Car Loans
More than 7 million Americans had auto loans that were 90 or more days past due at the end of 2018, according to a New York Federal reserve report, with auto loans overall at their the highest level in almost two decades.
The numbers are especially worrying given that there were more auto loans outstanding in 2018 than back in the waning days of the Great Recession in 2010. However, the growth has been attributed mostly to loans to customers with credit scores over 760, with just 22 percent of auto loans originating to subprime borrowers.
The increase in delinquent loans is most striking among younger borrowers and those with lower credit scores with subprime auto loans. Borrowers with credit scores below 620 saw their delinquency rates climb above 8% in the fourth quarter, which the Fed described as “surprising” given the strong labor market and economy.
"The substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labor market and warrants continued monitoring and analysis of this sector," said economists in the NY Fed’s report.
In 2018, $584 billion in new auto loans and leases appeared on credit reports, the highest level in the 18-year history of the loan origination data. Though the Fed reported that the borrower pool is the highest quality they have observed since they began collecting data in 2000, this was offset by a record number of subprime auto loan borrowers, who are at a high risk of delinquency.
Auto loans for borrowers under 30 had auto loans experienced a sharp increase in delinquency rates between 2014 and 2016, while delinquency rates for borrowers over 30 have risen slowly over the years.
If you’re struggling when it comes to auto loan debt, you have several options to find your way back to financial security, including visiting a financial counselor to help you chart out a course to repaying your auto debt, contacting your lender to renegotiate your payment arrangement and avoiding desperate decisions such as participating in dealership loan programs that let you trade in your vehicle for less than the amount you owe, and then rolling the balance difference into an auto loan for a cheaper car.
