Younger Borrowers Falling Behind in Car Payments
Jerry research reveals their delinquency rates rival those of the financial crisis of 2008 and 2009.
Federal data from the first quarter also shows borrowed amounts decreased.
Andrea Piacquadio, Pexels
An analysis of Federal Reserve data by car insurance comparison application Jerry reveals that millennial and generation Z borrowers are falling behind on their car payments at rates previously observed during the financial crisis of 2008 and 2009.
The quarterly household debt report of the Federal Reserve, which utilizes Equifax data to derive its auto loan delinquency numbers, categorizes borrowers according to age brackets that include 18 to 29 and 30 to 39 years.
According to the report, which covers the period from 2000 to the first quarter of 2023, those age ranges have historically exhibited greater delinquency rates than the national average.
The statistical data across that period shows that the rate of auto loan borrowers who were overdue by 90 days or more was 3.58% for the 18 to 29 age group and 2.62% for the 30 to 39 age group, compared to the average rate of 2.13% for overdue borrowers across all age groups.
For the first quarter of 2023, the study showed the 90-day delinquency rate was:
4.55% for 18- to 29-year-olds, the highest since the fourth quarter of 2009.
3.06% among 30- to 39-year-olds, the worst since the third quarter of 2010.
“Delinquencies are rising at a blistering pace,” Jerry data journalist Henry Hoenig wrote in the June 2 Jerry report. The growth between the first quarter of 2022 to the first quarter of 2023 was termed by him as the steepest in 23 years. Hoenig said the year-over-year increase observed in the first quarter of 2023 among consumers ages 30 to 39 was the most significant bump since 2007.
“The surge in delinquencies coincides, perhaps not surprisingly, with a steep drop in new auto loans, particularly among borrowers with lower credit scores,” Hoenig wrote.
According to his analysis, the federal data shows that in the first quarter, borrowed amounts decreased:
25% among consumers ages 18 to 29
17% in the 30 to 39 age group
18% in the 40 to 49 age group
However, Hoenig observed the reduction in amounts borrowed for vehicles could be because lenders have adopted more stringent lending policies in recent months.
Originally posted on Auto Dealer Today
More F&I
Four-Figure Loan Payments on the Rise
A LendingTree analysis found that location, age and credit score play a role in the rising amount of auto loan borrowers who make monthly payments of $1,000 or more.
Read More →
APCO Holdings Acquires Fidelity Dealer Services
The finance-and-insurance product provider says the addition strengthens EasyCare’s reach across key markets.
Read More →
Tariffs Could Raise Insurance Premiums
As U.S. import tariffs affect repair costs, consumers might find it more affordable to replace a damaged vehicle, according to recent Insurify tariff analysis.
Read More →
Smaller Loans, Longer Terms
The youngest generation of car buyers is more likely to finance less expensive vehicles, more than half of generation Z consumers borrowing less than $25,000.
Read More →
Ensure Your Clients Are Sure About Reinsurance
Industry experts recently broke down the complicated profit center at Agent Summit. Learn what’s relevant and what’s new to share with your dealers.
Read More →
Car Loans More Plentiful
May access opens up, as risk segments figured largely in the increased availability, Cox Automotive reported.
Read More →
First-Quarter Sees Long Auto Loan Growth
Experian data show more consumers are tapping the method, along with refinancings, to afford buying. Meanwhile, subprime borrowers are getting more access.
Read More →
Auto Consumer Anxiety Presents Opportunity
A survey of U.S. drivers found the majority are concerned about finances and the economy, but those fears make many ready to buy vehicle-protection products.
Read More →
New-Vehicle Financing Hits Record
Consumers are seeking ways to make financing new-vehicle purchases manageable, from extended loan terms to smaller down payments, according to Edmunds.
Read More →
Survey Reveals What Won't Fix What's Breaking Car Sales
AutoPayPlus says extra-long auto loans are trapping consumers and threatening the dealer trade-in cycle, and that the industry is leveraging the wrong tools to combat high MSRPs.
Read More →