7 million Americans behind on auto loan payments

[pipeguy]

Not a good sign....

https://thehill.com/policy/finance/429648-7-million-americans-behind-on-auto-loan-payments-ny-fed-sa...

[DapprD]

Oh boy ... that is NOT good news ... 

More of a REASON to get our CREDIT in ORDER !!!  NOW !!!

[Andypanda]

I wonder how many of these people are in the hole because they bought a car nire expensive then what they could afford.

[Anonymous]

WOW! Had no idea ... this is scary!

[Anonymous]

I don't mean to discount the importance of that data, but it's mostly in the subprime category. I still say the crash is coming in 2020. Gotta get in another good holiday shopping season before stocks fall and the only people left with big money can buy up everything in sight and ride the wave to greater wealth than ever before. You know, just like last time. And the time before.

See this Bloomberg.com article for a nice graph showing the delinquency rate by credit scores: https://www.bloomberg.com/news/articles/2019-02-12/auto-loan-performance-worsens-on-rise-in-subprime...

"“Despite auto debt’s increasing quality, its performance has been slowly worsening,” Joelle Scally, administrator of the Center for Microeconomic Data at the New York Fed, said in a statement. “Growing delinquencies among subprime borrowers are responsible for this deteriorating performance, and younger borrowers are struggling most acutely to afford their auto loans.”

I started a topic a month ago with the title 'Delinquency Rate on Credit Card Loans (Q3 2018)' because that showed a huge spike and some of the press ran with it. If you look closer at the data, it was mostly due to smaller banks and risky lending. See member iv's reply to my post there.

[pipeguy]

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@Andypanda wrote:

I wonder how many of these people are in the hole because they bought a car nire expensive then what they could afford.

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The following is from another version of this story from a different source:

"Auto loans surged in the past several years as car sales kept growing year after year, hitting a record high in 2016 of 17.5 million vehicles sold in the United States. Overall, many borrowers have strong credit scores and repay their loans, but the auto industry has suffered from high defaults among so-called “subprime” borrowers with credit scores under 620 on an 800-point scale."

Having been on these forums for a long time I see a bunch of posts from usually new members or visitors asking about obtaining financing for expensive vehicles - many of these writers have questionable credit scores but report good incomes. I'm not talking about any specific writer or thread, just a tendency of some - usually, younger posters to finance their "dream vehicle of the day" with more instant gratification than financial planning or forethought. Of course, a new semi-loaded new pickup or SUV can easily cost $50k or more with promotional (easy) financing making it happen as a monthly payment.

90 days late on a car loan is very late, even if the issue is limited to subprime loans, high default rates and losses are reflected in the overall lending rates we all pay - think of Cap-1 that does subprime and prime vehicle lending.  

[Revelate]

Most lenders will finance a secured loan which is what an auto loan is.

I don't know where this falls in the realm of bad news, on the one hand consumer deliquencies are never good, on the other hand even a bunch of auto loan defaults isn't a great strain on the market: secured, not mortgage, not that concerned other than the pattern in the subprime market.

[Anonymous]

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@pipeguy wrote:

Having been on these forums for a long time I see a bunch of posts from usually new members or visitors asking about obtaining financing for expensive vehicles - many of these writers have questionable credit scores but report good incomes. I'm not talking about any specific writer or thread, just a tendency of some - usually, younger posters to finance their "dream vehicle of the day" with more instant gratification than financial planning or forethought. Of course, a new semi-loaded new pickup or SUV can easily cost $50k or more with promotional (easy) financing making it happen as a monthly payment.

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I'd love to drive a Cadillac XT4, and no doubt could lease one if I didn't care about saving money for a down payment on my first home and also didn't care about how I spend my years in retirement.

So, yeah, I'll probably be driving a Chevy Trax LS when/if my current car dies. lol

[Anonymous]

I think a lot of people today tend to buy cars beyond their means to keep up with the Jones etc. Though nothing new, newer cars today are 2-4 times more expensive than they were. And they keep adding convenience/saftey options that raise the price. Sure if I wanted to spend every spare Dollar I had and scrimp on other things, i could drive some high end vehicle. But as far a I'm concerned it isn't practicale to do so. Impressing other people doesn't pay the bills nor give me any other finacial benefit. 

I always keep my car payments at half what i can afford, that way I can make double payments here and there to pay down quicker. Not to mention putting that extra Money in the bank for later, rather than fleeting moments of cool factor.  That's worth more to me than what some stranger or coworker thinks about my ride.

I never would have guessed that the number was this high though, that's a lot of people 3 months behind. What are they spending their car payments on I wonder? I'm also guessing the recent shutdown wasn't included this study, whch coud explain some of it.

If they are all sub prime borrowers, it's possible some of them were victim to aggressive sales tactics and poor loan rates. With those lower end scores, high APRs and low/no down payment. It further compounds the problems. 

I'm curious if the bailout had anything to do with this issue, like making it too easy for those people to get the loan in the first place? Similar to the the Hoasing market years prior.

[Revelate]

Walking back 90 days or so, December retail data was released today (to be clear, adjusted numbers) and that missed expectations in a big way, largest month over month decline since September 2009 which is a bit telling and wierd, Christmas and all... and it sure didn't show up in other data.

I suspect I may have bought my last car ever (either moving to a place I can walk to "work" or better mass transit wherever I live next), but on the flipside the money almost assuredly could've been spent elsewhere but meh, I can pay it.

Retail data article:

https://www.wsj.com/articles/retail-sales-declined-at-fastest-pace-since-2009-in-december-1155015144...