Car returns are on the rise, and financial analysts fear the trend will continue, the report said.
The auto lending industry looks a lot different than it did at the start of the pandemic, when Americans got a boost from stimulus checks and lenders were more willing to accommodate those who fell behind on their payments, NBC News reports.
The number of people falling behind on their car payments has reached epidemic levels in recent months. The rate of loan defaults for the lowest-income consumers is now higher than in 2019, according to data from the Fitch rating agency.
The trend is expected to continue through 2023 as economists expect unemployment to rise, inflation to remain high and household savings to decline.
$300,000 CADILLAC ELESTIQ MOSTLY SOLD OUT UNTIL 2025
The average monthly payment for a new car has risen 26% since 2019 to $718 a month, the report said. Nearly one in six new car buyers spend more than $1,000 a month on vehicles, and the costs associated with owning a car, including insurance, gas and repairs, have risen.
GAS PRICES HAVE DROPPED TO A NEW LOW, EXPECTED TO CONTINUE TO FALL IN 2023.
“These foreclosures are happening to people who two years ago could afford $500 or $600 a month, but now everything else in their lives is more expensive,” said Ivan Drury, director of insights at car-buying website Edmunds. : “That’s where we start to see the takeovers happen, because it’s just anything that starts to rub off on you.”
Some noticed the number of repos increasing earlier this summer. Joey Polishchuk runs Phoenix area Hoist Towing & Recovery and Gorilla Towing & Recovery. He told FOX 10 back in July that he believed the sluggish economy meant foreclosure numbers would continue to rise.
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“Default and foreclosure rates are not expected to reach the levels seen in 2008 and 2009, when there was a surge caused by the financial crisis. The percentage of auto loans that were 30 days past due was 2.2% in the third quarter, compared with 2.35. The delinquent rate compared to the same period in 2019, according to Experian. By contrast, just over 4% of auto loans were in default in 2009,” NBC News reported.