More Americans Behind on Car Payments
A record number of subprime borrowers are 60 days or more behind on their car loans, according to the ratings agency Fitch. Federal Reserve data backs up the conclusion. Analysts think auto loan delinquencies will rise further next year but say the peak is in sight.
Historically high car prices squeezed most subprime borrowers (those with credit scores under 620) out of the new car market entirely in 2023. Subprime and deep subprime loans accounted for nearly a quarter of the market as recently as 2018 but are barely 8% today.
Many subprime borrowers who bought a new car recently struggle to pay for it. The percentage of subprime auto borrowers at least 60 days late on car payments rose to 6.11% in September, according to Fitch. That’s the highest figure since the agency began tracking data in 1994, Bloomberg reports.
The New York branch of the Federal Reserve Bank, in its quarterly Household Debt and Credit Report, shows a sharp spike in loans both 30 and 90 days late so far in 2023.
Some analysts believe the delinquency rate could move higher next year. Moody’s Investors Service told CNN last week that auto loan delinquency could crest “in 2024 at between 9% and 10%, compared with 7% pre-COVID.”
Borrowers are squeezed by historically high interest rates and the return of student loan payments, which the federal government previously paused for more than three years in response to the COVID-19 pandemic.