Americans Falling Behind on Car Payments

Oct. 25—More Americans, especially those with lower incomes, are struggling to make car payments, as inflation, higher interest rates, and job market difficulties put pressure on household budgets. Subprime auto loan delinquencies have reached nearly 6.5%, a record high, and repossessions are rising. Lenders like CarMax, Capital One and Ally Financial are warning investors about worsening loan performance. The financing arms of the carmakers are also reporting similar disheartening results, and are tightening lending when sales are down from last year.

Given how essential cars are to most Americans, and their ability to work, the rise in delinquencies is particularly concerning. These figures will only get worse when the effects of the government shutdown start really hitting, with those figures themselves delayed by the shutdown.

Pandemic-era financial benefits—such as stimulus checks and paused student loans—are gone, while prices and borrowing costs remain high. And more borrowers are “under water,” owing more than the value of their cars.

Sources in the Trump administration say that the President is considering issuing a new stimulus check, prior to Christmas, but is wrestling with how to do this without admitting to an economic downturn. These sources say the Trump wants to give this to help offset the immediate effects of tariffs, which he can then blame on other countries.

The recent bankruptcy of Tricolor Holdings, which specializes in loans to lower-income borrowers and people without legal presence in the U.S., may be a sign of things to come.

Auto loans account for less than a tenth of U.S. household debt, which stands at $18.4 trillion, the New York Times reports, but loan delinquencies reveal growing difficulties among lower-income and middle-class families that would only worsen with economic shocks.