Auto Loan Delinquencies Soar to Levels Not Seen Since Financial Crisis

Strategic Insights -

The US auto loan market has reached alarming levels of delinquency, with subprime borrowers in particular struggling to keep up with payments. A surge in car loan defaults has sent shockwaves through the financial sector, triggering warnings from top executives at JPMorgan and Goldman Sachs. According to VantageScore, delinquencies have risen by 50% over the past 15 years, making car loans one of the riskiest consumer credit products.

Key Takeaways:

  • The share of car loan borrowers missing payments on their debt has surged to levels not seen since the financial crisis, with a 50% increase in delinquencies over the past 15 years.
  • Among subprime borrowers, delinquency rates have hit a record high, with 6.43% of loans in August showing 60-day or more delinquency, the highest level since Fitch Ratings began collecting data in 1993.
  • The average price of a new car has risen by 35% since 2019, exceeding $50,000 this year, while average monthly payments on new car loans have soared to $761.
  • 1.73 million cars were repossessed in 2022, the highest number since 2009, according to Cox Automotive.
  • Lenders are increasingly selling subprime auto loans as asset-backed securities (ABS), which are then traded on Wall Street, sparking concerns about market stability.
  • The US Justice Department is investigating subprime lender Tricolor over allegations of fraud and mismanagement.
  • Auto financier Consumer Portfolio Services has pulled back on lending this year, citing "customer constraint and under pressure," with outstanding loans that fell into repossession more than doubling since 2022.
  • Moody's Analytics chief economist Mark Zandi warns that "you're seeing all of this stress when everyone has got a job, so what happens if people start losing their jobs?"

Statistics:

  • Delinquency rates on car loans have increased by 50% over the past 15 years, according to VantageScore.
  • 6.43% of subprime auto loans were 60 days or more delinquent in August, the highest level recorded since Fitch Ratings began collecting data in 1993.
  • 1.73 million cars were repossessed in 2022, the highest number since 2009, according to Cox Automotive.
  • The average price of a new car has risen by 35% since 2019, exceeding $50,000 this year.
  • Average monthly payments on new car loans have soared to $761.
  • Consumer credit counseling services have seen a surge in clients struggling with debt, with the American Consumer Credit Counseling (ACCC) reporting a 60% increase in average debt load to $30,000.

Sources:

  • VantageScore
  • Fitch Ratings
  • Cox Automotive
  • ACCC (American Consumer Credit Counseling)
  • Moody's Analytics
  • Deutsche Bank
  • JPMorgan Chase
  • Goldman Sachs
  • Edmunds
  • Federal Reserve Bank of New York
  • Consumer Portfolio Services
  • CarMax