Car Owners Are Struggling With Their Auto Loans

Recent research from TransUnion points to a possible trend in the auto loan market – rising liquidity. About 3.5% of auto loan customers are currently behind on their payments.

An increase in delinquency rates may indicate that households are struggling with debt, especially given that meeting car loan payments is a high priority for many households. If you’re struggling to meet all of your debt payments, however, you should think about paying off your most expensive debt first — and for most people, that means credit cards.

  • About 3.5% of auto loan customers are currently behind on their payments.
  • People who could have missed car loan payments during the pandemic have been able to meet them with government support and stimulus programs. Now they are lagging behind.
  • The total number of auto loans in the US has decreased due to rising interest rates.
  • While it is important to prioritize high-value debt, typically credit card debt, car loans are secured by the vehicle and can be repossessed if payments are not made.

About 3.5% of car loans are delinquent

A recent TransUnion study found that by Q2 2022, 3.34% of auto loans were more than 30 days delinquent and 1.43% were more than 60 days delinquent. This is the highest figure in five years and a significant increase in the last two years.

TransUnion offered a number of reasons for the increase. First, they note that there may have been some violations as a result of the pandemic. Many people who may have fallen behind on their car loan payments during the pandemic were not due to government relief, stimulus programs or car loan providers offering temporary relief to their customers.

Second, although the number of delinquent auto loans is at a five-year high, the total number of auto loans has declined since 2018. This is partly due to the limited supply during and immediately after the pandemic, which meant that many customers had problems. even finding a car for financing. It’s also due to the rising cost of new cars – the average cost of a new car is more than $48,000, a record high.

Car loans are also more expensive due to higher interest rates. In the last month, the weighted average rate of car loans for all types of loans increased by 2.8 percentage points and made 10.6 percent. People with poor credit scores are likely to be hit hard by these rate hikes. In October, a deep borrower with a credit score below 580 saw an average rate of 18.2% on a new car loan and 21.8% on a used car loan.

The bottom line: It appears that many people who fell behind on their car loans during the pandemic but were able to make payments with stimulus payments are now doing so. At the same time, the total number of car loans will decrease. Both factors combined mean that crime rates are at an all-time high.

Should I prioritize my car loan?

TransUnion’s research also revealed some interesting data about how consumers prioritize their payments. Research has shown that most people consider their monthly car loan payment to be one of their most important financial obligations — second only to paying off their mortgage and far more important than credit card payments.

And that makes sense. Paying off auto loans is tied to a tangible asset—the vehicle you already use. Additionally, the increase in the value of cars over the past year means that many people are actually in a positive loan-to-value situation: that is, their car is actually worth more than the loan they took out to buy it. Both of these factors explain why paying off a car loan is considered a high priority in many households.

Consumers should be wary of prioritizing an unsecured loan over their car loan. If you’re having trouble with your car loan, your lender may offer flexibility in your payments, so you should contact them before you miss a payment. If you miss a payment, your lender will likely impose penalties and eventually repossess the car if the loan defaults.

As with all types of debt, late payments can have a negative impact on your credit score, so it’s important to budget appropriately for debt service.


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