Many Amer­i­cans late on car loans

The Buffalo News - - BUSINESS NEWS - By Heather Long

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.

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