We all are perfectly aware of the immense student loan debt. We’re also on the look out for rising credit card debt. But there is another form debt that is skyrocketing and should be front and center of the debt discussion: automobile loans.
American consumers are borrowing more than ever to purchase new and used vehicles. And this could pose a serious harm to the United States economy.
Between April 1 and June 30, the total balance of all outstanding auto loans topped $1.027 trillion, according to Experian Automotive (via USA Today). Many U.S. motorists are also turning to car leases as they accounted for nearly a third of all new car and truck transactions.
The average new car loan was $29,880, which is up roughly five percent from the second quarter of 2015. The average monthly car payment was $499, up from $483 the same time a year ago.
What is even more concerning is the fact that 30- and 60-day auto loan delinquencies are going up. It was found in July that 60-day subprime loan delinquencies climbed 13 percent on a month-over-month basis, and up 17 percent compared to the same time last year. Prime delinquencies were up 12 percent on a month-over-month basis, and up 21 percent from last year.
“Yes, subprime and deep-subprime loans are growing, but the entire market is growing from a volume perspective across all risk tiers,” said Melinda Zabritski, Experian senior director of automotive finance, in a statement. “In fact, the subprime loans have actually dropped as a percentage of the total market. That, combined with only a slight uptick in delinquencies, makes clear that the sky is not falling.”
This is just another signal of a coming economic collapse.
Here is what Michael Snyder of Economic Collapse Blog opines:
The pace of the economic decline has been a bit slower than many (including myself) originally anticipated, but without a doubt it has continued.
And it is undeniable that the stage is set for a crisis that will absolutely dwarf 2008. Our national debt has nearly doubled since the beginning of the last crisis, corporate debt has doubled, student loan debt has crossed the trillion dollar mark, auto loan debt has crossed the trillion dollar mark, and total household debt has crossed the 12 trillion dollar mark.
We are living in the greatest debt bubble in world history, and there are signs that this giant bubble is now starting to burst. And when it does, the pain is going to be greater than most people would dare to imagine.
What happens when layoffs become more prevalent? What happens when interest rates start soaring? What happens when the money printing halts? We’re in for some bad times in the near future.
The sky is falling, NOT! Auto loans have continued to grow in amount, because the price of a new car have gone up. Even if default rates go up a little, the bank will still have an asset to sell when the borrower cannot make the payment, so it is not a total loss. The debt bubble if there is one is not going to burst anytime soon. People need their cars and a place to live, so as long as they have some income those payments will continue, no matter what. Even when my sister was on unemployment for a year, she never missed a car payment. She had to work with her utility company and landlord on payments, but she was not going to lose her car.
JRATT you are so wrong. With no job car gets repossessed.
Not if you have other income, SS or unemployment, or savings. I know several friends who were laid off and they sold the cars before the repo man came. But, like I said the bank still has an asset.