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Auto Credit Crunch Tightens

Borrowers taking on more debt, moving many into delinquent territory.

July 1, 2024
Auto Credit Crunch Tightens

The percentage of borrowers late on their payments by 60 days or more rose year-over-year from 1.2% to 1.3% in the first quarter.

Credit:

RDNE Stock

1 min to read


Automotive debtors' burdens are getting heavier.

A study by Transunion found that average monthly debt responsibility rose 20% over the past two years, far outpacing Consumer Price Index growth.

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The credit bureau said the average monthly auto loan payment has climbed steadily since the first quarter of 2022, from $1,345 to $1,583 in this year’s first quarter. It said that’s almost double CPI increases over the same time frame.

So it’s not a surprise that delinquencies have gone up during that period. Borrowers late on their payments by 60 days or more rose year-over-year from 1.2% to 1.3%.

The turn of events is curtailing deliveries, despite revived inventory and increased incentives, Transunion said.

“Just as auto inventories began to recover from the worst of the pandemic era supply chain shortages, elevated inflation and higher interest rates that followed have put consumers in a tight financial bind,” said Executive Vice President of Financial Services Jason Laky in a press release. “As a result, many have been taking on additional and larger monthly payments each month to service higher debt levels. This has likely contributed to some consumers holding off on buying or leasing a new auto.”

The debt pressures are particularly affecting below-prime borrowers, the bureau said.

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Originally posted on Auto Dealer Today

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