Number of Americans Struggling to Make Car Payments Hits Highest Since Great Recession

An increasing number of Americans are falling behind with their car payments is a worrying sign. U.S. economy As high car prices rise and inflation persists, household budgets are under pressure. 

The number of car repossessions fell in the first days of the pandemic. This was because the government sent millions upon millions of Americans stimulus check. However, they have steadily risen as skyrocketing prices have made them more expensive. Used and new cars Consumers were also forced to take out larger loans.  

In December, the percentage of subprime auto borrowers who were at least 60 days late on their bills climbed to 5.67% — a major increase from a seven-year low of 2.58% in April 2021, according to Fitch Ratings. This represents the highest level of Americans struggling with car payments since 2008’s financial crisis. 

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The pain caused by higher car prices has been exacerbated by rapidly rising interest rates. (Kena Betancur/VIEWpress / Getty images)

Due to a shortage of semiconductors and other factors, prices for new and used vehicles rose last year. COVID-19-induced disruptions Global supply chain. Despite the fact that fewer cars were being made, consumers still wanted them, which drove up prices. 

Prices started to subside toward the end of 2022, but the average cost of a new car is still near $50,000 — a record. 

Inflation rapidly increasing This has added to the misery of higher car costs. 

According to Cox Automotive, the average auto loan rate rose to 8.2% in December from 5.15% a year ago. Combining this with the steeper stick price, new-vehicle affordability fell to its lowest level since 2022. 

Last year’s surge in prices for new and used vehicles was due to a shortage of semiconductors as well as other COVID-19-induced disruptions within the global supply chain. (AP Photo/Paul Sancya / AP Newsroom)

Rising interest rates and rising car prices have led to increased monthly payments for many Americans of over $1,000. 

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According to Edmunds.com, an online source for information and auto inventory, the proportion of consumers who pay at least $1,000 per monthly for their cars rose to a new record in the last three month of 2022. The fourth quarter saw 16% more consumers finance a new vehicle than they did a year ago. 

This raises the possibility of trouble in the future for the auto industry if consumers default on their loans.