Source: Fortune
Summary
Americans are carrying a record $1.68 trillion in auto loan debt, rivaling federal student loan debt and credit card balances. The average monthly car payment has risen to $680, up 40% from 2018. Lower-income households are disproportionately affected, with payments consuming nearly 20% of their monthly income. The report’s authors note that “historically high auto costs and interest rates are pushing record numbers of borrowers into longer term loans that raise the total costs of owning a car and keep households in debt.”
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The numbers tell one story.
Car prices have increased by 30% since 2019, with new vehicles selling for an average of almost $50,000. Lower-income earners are being priced out of the new car market, with only 37% of buyers having salaries under six figures. Used car prices are also 29% higher than before the pandemic. Subprime auto loan delinquencies are now more common than in 32 years.
Defaulting on a car loan can have severe consequences, as many Americans rely on their car for daily necessities. The situation is a reflection of the country’s K-shaped economy, where lower-income earners are disproportionately affected by rising auto costs.
The auto debt crisis is a ticking time bomb, with many borrowers struggling to keep up with payments. The situation is likely to worsen, with more Americans facing financial hardship.
Author: Evan Null
