I don’t know what percent of borrowers are “subprime.”
Everyone who is young and starting out, every struggling single mother etc. I guess.
Well, 6% of them are seriously delinquent on their car payments.
By Claire Ballentine
October 21, 2023 at 9:00 AM EDT
Listen
4:18
Americans are falling behind on their auto loans at the highest rate in nearly three decades.
With interest rate hikes making newer loans more expensive, millions of car owners are struggling to afford their payments. It’s a clear indication of distress at a time when the economy is sending mixed signals, particularly about the health of consumer spending.
The percent of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September, the highest in data going back to 1994, according to Fitch Ratings. In April that figure slipped from a previous high of 5.93% in January. But after burning through tax returns, contending with a shakier job market and grappling with still-elevated inflation, more car owners have become delinquent.
Many used COVID money as a down payment and financed the rest. Many also bought toys; boats, RVs, side by sides, motorcycles and other “wants”. Easy come/easy go applies in some of these situations and for all of those that saved and only purchased needs, there’s going to be a big sale at the auctions with all of the repossessions that are coming.
The other problem was that new cars were in short supply, this greatly raised the price of a used car. Those that purchased them during this time, are what they call…buried in their purchase. They owe much more on it than it’s currently worth.
Just glad I don’t have to deal with that crap anymore.
My wife drives a 2010 Mazda 3 and I drive a 2014 Mazda CX-5, both financed for 5 years and paid off in 3.
Been eyeing a Subaru Outback Limited Edition as our retirement vehicle. Since we haven’t had a car payment in 6 years we’ve been putting a little sum’tn-sum’tin in a vehicle fund so we can pay cash for that. The Touring is nice, but the only thing it has that I’d really want was a backward facing camera in the base of the top fin which can be displayed up front even if the rear view mirrow is blocked. Nice but it’s the other stuff that I’m not really interest in that raises the cost by an additional $4500. So I’ll pass on that upgrade.
Just so the point is not lost.
We don’t know from this data how bad the overall situation is.
The data points to a K-shaped economy not necessarily a declining economy.
6.11% of subprime auto borrowers at least 60 days past due on their loans in Sept., but the data doesn’t tell us if subprime means every waitress mom and every kid starting out, or just the dregs of society who shouldn’t have bought a car (cash or credit) in the first place.
People in the subprime rates are paying over 11% interest rates on vehicle financing.
First link is more on the situation.
Second link helps define subprime. And my reading it income is only one factor, as with any credit score debt to income ratio is also a factor. So we’re not just talking about the single Mom trying to make ends meet as a waitress. We talking about people with good jobs that have made poor spending decisions.
