The car payment crisis is getting worse. And it’s already bad. The number of people that are behind on their car payments continues to rise and it doesn’t look as if it’s going to get any better.
From Bloomberg:
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.
This is all mostly affecting subprime borrowers. However there are other factors at play such as ever-increasing vehicle costs and annoyingly high interest rates, something you can blame the Fed for.
For those with the best credit scores, interest rates are about 5.07% for a new car and 7.09% for a used vehicle on average, according to Bankrate. And for those with the worst credit, rates are about 14.18% and 21.38% for new and used cars, respectively.
Repos are also up, with data from Cox Automotive estimating that some 1.5 million cars will be repossessed this year.
Blame can also be placed on car buyers. Many people just don’t seem to want to try and understand what they’re really getting into. Take one woman Bloomberg spoke with, who thought it was a good idea to buy a Honda Ridgeline with a 13.58 percent APR while making under $18 an hour.
Josephine Corvacchioli in Denver said that with her credit score of 580 she’s paying an interest rate of 13.58% on her 2019 Honda Ridgeline truck. The expense comes out to roughly $700 a month for the loan and insurance.
The 28 year old makes $17.50 an hour at Costco, so she’s struggling to make her car payment along with her rent, all while she tries to pay down more than $20,000 in credit card debt.
Shaky financial situation or not, everyone should know what they’re getting into before they sign on that dotted line. With car companies coming out with more and more shiny new models and people willing to jump through hoops like reservations and markups to be able to have the first of something, none this seems as if its going to get better anytime soon.