More Americans Default on Car Loans

Auto repossessions are on the rise, and industry analysts worry inflation and a recession could push them even higher, NBC reports. At the start of the pandemic, when people got stimulus checks and lenders were more forgiving about late payments, repossessions fell. Inflated car prices and gasoline have caused people to fall behind on their car payments in recent months. Among lowest-income Americans, defaults are higher than they were in 2019. With unemployment forecast to rise in 2023, inflation expected to remain high and the specter of a recession on the horizon, experts fear repossessions could tick higher. Today, it costs an An average of $718 a month to lease a new car, 26% higher than in 2019, when the cost of leasing a new car was as low as $500. In fact, nearly one-in-six new car buyers is spending more than $1,000 a month for their vehicle. Used cars now cost $20,000 to $25,000 on average, up from $7,000 to $15,000 before COVID, inflation and supply chain disruptions. t even include the cost of insurance, gas and repairs. As Ivan Drury, director of consumer insights at car buying website Edmunds, puts it, “These repossessions are occurring on people who could afford that $500 or $600 a month payment two years ago— but now everything else in their life is more expensive. That’s where we’re starting to see the repossessions happen, because it’s just everything else starting to pin you down.” Those with below-average credit scores, who typically pay more to lease a car, and those who took on loans in 2021 and 2022 when auto prices spiked, are being particularly punished, according to the Consumer Financial Protection Bureau. “Those consumers got hit with inflation twice,” says Ryan Kelly, auto finance program manager at the CFPB. “First, when they had to finance a car after the prices went up, and then whey they had to put gas in the car after the Russia-Ukraine conflict started. So, there’s just a lot of consumer stress.” Putting this in the perspective of the 2008 Great Recession, however, 4% of auto loans defaulted in 2009. © 2022 Newsmax Finance. All rights reserved.

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