The national economy is supposedly getting better, and that means consumers are ramping up their appetite for borrowing, credit and debt. This trend can be situated in the automobile industry as more Americans are buying cars, but the important question is: can they afford it?
According to two new reports released by Experian and TransUnion (via CNN Money), a surging number of Americans are falling behind on their auto loan payments. The studies discovered that there was a nine percent (Experian) jump in 60-day delinquency rates and a 13 percent spike (TransUnion).
Experts present the case that the reasons for this increase in delinquency rates and late payments are due to the rise of car prices and sales, which equates to the substantial boost in the average size of an auto loan, something that is at a record high. Others allude to the fact that more used vehicle purchasers need to borrow money to complete the transaction, and these motorists are likelier to lag behind on their payments.
One trend that has returned in the post-crisis era is that lenders are giving loans to consumers with poor credit. The TransUnion report noted that more than one-third (36 percent) of new car loans are now given to subprime borrowers, an increase of five percent from the beginning of the Great Recession.
Study authors are pointing to positive data (if one can call it that): consumers are doing a better job keeping up with their auto loan payments than their mortgage or credit cards. More than three percent of mortgages were 60 days past due in the previous quarter, while credit card delinquency rates grew to more than two percent.
According to data released by the Federal Reserve Bank of New York (FRBNY), United States consumer debt is now close to $12 trillion. Reports released over the past year have continued to show that consumers are borrowing just as much as did they prior to the economic collapse. In fact, as we reported in September, consumers are reducing their savings habits in order to consume.
Leave a Comment