7 million Americans are behind on auto loan payments
According to the Federal Reserve Bank of New York, there are over 7 million Americans who have reached serious delinquency status on their auto loans, meaning they are at least 90 days behind on payments.
That is over a million more troubled borrowers than there were at the end of 2010 when the overall delinquency rates were at their worst. The country is at an all-time high for loan delinquencies.
The figure indicates that many Americans are having difficulties paying their bills, despite a strong economy and low unemployment rate.
“The substantial and growing number of distressed borrowers suggests that not all Americans have benefitted from the strong labor market and warrants continued monitoring and analysis of this sector,” economists at the New York Fed wrote in a blog post.
The rising number of borrowers who are behind on auto payments has been driven by people with very low credit scores. Most of the delinquent borrowers with auto loans are people under the age of 30 with low credit scores.
Borrowers with credit scores below 620 – also known as subprime borrowers – saw their transitions into delinquency rise above 8 percent in the fourth quarter, a development that economists said “is surprising during a strong economy and labor market.”
The U.S. PIRG issued a report titled ‘Driving Into Debt’ warning that rising indebtedness for cars “raises concerns for the financial future of millions of households.” As the PIRG notes in its report, the amount of money that Americans owe on their cars has risen by 75% since the end of 2009.
A significant share of that debt has been incurred “by borrowers with lower credit scores, who are particularly vulnerable to predatory loans with high interest rates and inflated costs,” the report said.