More Americans are falling behind on car payments than at the height of the 2008 economic crash as households feel the bite from the aftermath of global lockdown policies, according to a recent analysis.
Bloomberg reports that 5.67% of car loans with poor credit ratings are now over 60 days late on a payment, compared with 5.04% in 2009. Meanwhile, used car prices skyrocketed in 2003, making it more difficult than ever to lease or purchase a vehicle.
One of the key problems has been supply chain issues brought on by the Chinese coronavirus pandemic that hit the automobile market harder than practically any other industry.
The biggest shortage is now in semiconductor chips, which are now required in the production of practically all new vehicles. This has led to a drop in production for some of the most popular vehicles leading to significant price rises. Furthermore, other associated costs have also increased significantly, including insurance, gas and repairs.
Meanwhile, interest rates continue to rise through the roof, with the average price of a new car hitting as high as $50,000 in December 2022. The most badly affected have been Millennials and Gen Z, who tend to have lower credit scores than those of older generations.
Last month, a report from Zero Hedge outlined how a "massive wave" of car repossessions and loan defaults could trigger a collapse in the automotive industry and carry significant consequences for the U.S. and the global economy.
“These repossessions are occurring on people who could afford that $500 or $600 a month payment two years ago, but now everything else in their life is more expensive,” Ivan Drury, director of insights at car buying website Edmunds, told the outlet. “That’s where we’re starting to see the repossessions happen because it’s just everything else starting to pin you down.”
