Jeff Fox of Fox Business reports the latest news emerging from the automotive industry, as data reveal that insurance prices have increased from year to year.
The failed payments on car loans by American car owners reached the highest level in three decades earlier this year.
The percentage of borrowers with subprime car loans which are at least 60 days due to their loans increased to 6.56% in January, which was the highest level since the start of data collection in 1994, according to Fitch Ratings.
The share of 60 days after borrowers of automobile loan at risk has remained greater than 6% since August 2024 after having broken the threshold of 6% for the first time at the beginning of last year. He previously approached the 6% mark in 1996, 2019 and 2023.
The increase in the number of borrowers struggling with car loans comes as consumers continue to combat the impact of inflationary pressures that the US economy has suffered in recent years, which have set the budgets of American households. Higher interest rates aimed at reducing inflation have also made new loans more expensive for borrowers.
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Risk car loan defects reached a record level in January, Fitch Ratings reported. (Brandon Bell / Getty Images / Getty Images)
A recent analysis of the New York Federal Reserve Bank has revealed that car loan sales have increased regularly since 2011 and increased by $ 48 billion in 2024 due to a newly originating inventory of car loans.
“Almost all borrower groups have seen the delinquency rates increase beyond their pre-pale levels,” wrote the NY Fed. He noted that borrowers with credit dimensions between 620 and 679 saw their probability of becoming a delinquent during a given quarter, going from around 2% before the pandemic to 4% in 2024.
The report revealed that consumers are “in fairly good shape in terms of household debt landscape” with stable sales and solid performance in mortgage loans – but problems noted with car loans.
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The high car prices and high interest rates have set out borrowers with car loans. (Bridget Bennett / Bloomberg via Getty Images / Getty Images)
“However, for car loans, higher prices for higher interest rates have increased monthly payments and put pressure on consumers through the income and credit dimensions,” said the New York Fed.
“The episode of the price increase in the car prices experienced a rapid increase in cars had heterogeneous impacts on borrowers, who have exceeded used cars and new cars as well as between loans and leases.
“The prices of used cars have since decreased the summit, potentially leaving certain borrowers underwater on these vehicles and creating potential reimbursement challenges,” they noted.
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The New York Fed reported in February that among all car loans, the share of borrowers who entered serious delinquency with payments at least 90 days spent due to 3% in the fourth quarter of 2024, which has been the highest level since 2010.
