WEST PALM BEACH, FL – The number of young Americans who are delinquent on their car loan payments have reached the highest level in the 14 years since the tail-end of the Great Recession, according to a new report put out by the New York Fed.
In the second quarter of 2023, the number of individuals under the age of 30 with car loans who were at least 90 days overdue on their monthly payments – known as “serious delinquency” – had reached 4.6 percent. This number represents a significant increase year-over-year and is the highest percentage on record since 2009, when loan delinquency in that age group reached 4.7 percent.
The number of new automotive loans and leases across all ages last quarter was $162 billion, which is a decrease from the same period of time in 2022 but nonetheless an increase when compared to before the COVID-19 pandemic. The percentage of all borrowers – regardless of age – who were seriously delinquent on their car loan payments in the second quarter was 2.3 percent.
However, younger Americans are the group that appears to be having the most issues with delinquency, with experts reasoning that this is due to individuals aged 30 and under being “more vulnerable” to ongoing macroeconomic trends.
One of these trends involves interest rate hikes put forth by the Federal Reserve in order to combat the record-high inflation currently gripping the nation. These rate hikes directly translate to higher interest rates on auto loans, with Americans currently paying approximately $50 to $60 more than usual each month, according to Bankrate.com’s Chief Financial Analyst Greg McBride.
The payments are absolute budget busters,” he said. “The average car payment for new car buyers was $800 a month last year, [and] about one in seven buyers has a payment of at least $1,000 a month. There’s no wiggle room there.”
If the Fed’s efforts to curb inflation are unsuccessful and the nation enters a recession, McBride said things are only going to get worse.
If the economy weakens and goes into a recession, we’re going to see a level of auto loan delinquencies that hasn’t been seen in a very long time, if ever,” he said.
Christopher Boyle is an investigative journalist, videographer, reporter and writer for SEARCHEN NETWORKS® as well as other independent news and media organizations in the United States. Christopher works on a wide variety of topics and fields, has been featured in print and online in a variety of publications, from local to national, and helps keep a keen-eye on what’s happening in the automotive world for Auto Buyers Market.