A growing number of Americans are struggling with car payments, indicating potential economic strain.
Delinquencies have risen to 7.69%, the highest level since 2010, attributed to high car prices and borrowing costs.
A semiconductor shortage and COVID-19 disruptions caused vehicle prices to surge, with the average new car cost at $48,759.
New York Fed researchers recently reported, “It’s a little bit perplexing why we’re seeing these increases in the delinquency rates, particularly for certain types of borrowers.”
“I think the price of cars is one clue that there might be some stress in that space,” they continued.
Interest rates have also increased, impacting monthly payments, with 17.1% of consumers now paying over $1,000 a month for a vehicle.
The Federal Reserve’s plan to maintain elevated interest rates until inflation subsides suggests continued financial pressure.
Wilbert van der Klaauw, economic research adviser at the New York Fed said, “Auto loan transitions into delinquency are still rising above pre-pandemic levels.
“This signals increased financial stress, especially among younger and lower-income households,” he continued.
This trend particularly affects younger and lower-income households, potentially signaling broader economic challenges.
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