Many Americans late on car loans
A rising number of Americans are unable to make the monthly payments on their car or truck loans and are in danger of having their vehicles repossessed, according to data released Tuesday from the New York Federal Reserve.
There are 6.3 million Americans who are 90 days late – or more – on their auto loan payments, an increase of about 400,000 from a year ago. When someone gets so far behind on their payments, they typically end up losing their vehicle.
The delinquency rate on autos has been steadily rising since 2011, a red flag at a time when the unemployment rate has been falling. The unemployment rate is now 4.1 percent, the lowest level since 2000. As more and more Americans get jobs and income coming in, it should be easier for them to pay their bills. But the rise in auto loan delinquencies is a reminder that millions are still struggling to make ends meet.
Many of the people who can’t pay their car loans have bad credit scores of under 620 on an 800-point scale. They don’t have many options to get money to buy a new or used car and often end up getting a subprime auto loan that comes with an interest rate of 15 to 20 percent.
The Fed noticed a big difference between how people who get their auto loan from a bank or credit union vs. those who get a loan from an “auto finance lender,” such as a “Buy Here, Pay Here” firm. Among auto finance companies, 9.7 percent of their subprime loans are late by 90 days or more, not far from the delinquency rate during the worst days of the Great Recession.