Auto loan crunch widens as pandemic-era government aid ends

With inflation and high prices still a factor nationwide, a growing number of Americans are struggling to make their monthly auto loan payments.

a new report from transunion Tuesday found that 1.65% of loans in the third quarter were delinquent for at least 60 days. This is the highest rate for a 60-day offense in more than a decade. Subprime borrowers, or those with low credit scores and typically low incomes, are struggling the most.

TransUnion tracks over 81 million auto loans nationwide.

“Consumers still want to be the best they can be,” said Satyan Merchant, Senior Vice President, TransUnion. CNBC, “That’s the inflationary environment that’s making it challenging.”

“It leaves fewer dollars in their pocket to make auto loan payments because they have to pay more for eggs and milk and other things,” Merchant said.

The rise in crime coincides with the end of loan-housing programs that began during the COVID-19 pandemic. Those programs were intended to help out-of-work individuals avoid having to repossess a vehicle because they couldn’t make monthly payments.

TransUnion reports that nearly 200,000 loans that previously used those residences are now 60-day delinquent. The credit firm says about 100,000 loan accounts that are delinquent for more than 60 days remain in pandemic-era programs.

“There’s been an impact where the crime that happened over the years has really just been pushed out or delayed because that consumer didn’t have to pay, or their position was at a residence. So now some of them are hitting ,” said the merchant.

Merchant said the auto loan market remains healthy despite rising crime numbers and low unemployment is helping right now. Higher interest rates and average transaction prices are prompting many new borrowers to take out longer-term, seven-year loans to help keep monthly payments low.

Merchant said, “If we get to a situation where employment becomes a challenge in the United States and unemployment rises, then the industry really starts to worry about the consumer’s ability to pay off auto loans. will give.”

Did you enjoy this article? Please share your thoughts, comments or questions regarding this topic by joining us [email protected],