Auto Loan Delinquencies rise, Signaling Broader Economic Concerns
WASHINGTON – A growing number of Americans are falling behind on their auto loan payments, a trend experts warn could foreshadow wider economic difficulties. Delinquency rates are climbing, raising concerns about consumer financial health and potential ripple effects across the economy.
Recent data indicates a notable increase in borrowers 30-60 days past due on their auto loans. According to the New York Federal Reserve, auto loan delinquency rates reached 2.2% in the first quarter of 2024,the highest level since 2011. While still below pre-pandemic levels, the upward trajectory is alarming to economists.
“We’re seeing a clear signal that financial stress is building among consumers, and auto loans are ofen one of the first places it shows up,” said Mark Zandi, chief economist at moody’s Analytics. “As other debts become more burdensome, people tend to prioritize necessities like housing and food, and auto payments can fall behind.”
The rise in delinquencies is especially pronounced among younger borrowers and those with lower credit scores, who are frequently enough saddled with higher interest rates. Erinn Compton, a substitute teacher, experienced this firsthand. she lost her car and later her apartment and job after falling behind on payments due to a high-interest auto loan in 2023, leading to a period of homelessness. “Although my story is complex, the solutions are easy to solve these continuous cycles of burden for any and everyone,” Compton told USA TODAY. “Our contry is in a state of crisis from not just big things but also these everyday little things that are overlooked by the highest levels and wealthy corporations that don’t have to feel it directly.”
Several factors are contributing to the increase in auto loan delinquencies. Inflation,while cooling,continues to strain household budgets.Rising interest rates, implemented by the Federal Reserve to combat inflation, have made borrowing more expensive.Additionally, the end of pandemic-era forbearance programs and student loan payment restarts are adding to financial pressures.
Consumer advocates are calling for greater government oversight and consumer protections. Rosemary Shahan, president of Consumers for Reliability and Safety, stated, “People are hopelessly outgunned when they go to a car dealer,” adding that “the agencies that are there to protect us at the Federal level have abandoned consumers.”
The politicization of federal agencies tasked with consumer protection, such as the Federal Trade Commission, is also raising concerns. Biden-appointed commissioners have faced removal by the Trump governance,potentially weakening consumer safeguards.
The trend in auto loan delinquencies is being closely watched as a potential indicator of broader economic weakness. A sustained increase in defaults could have negative consequences for lenders, the auto industry, and the overall economy.
Betty Lin-Fisher is a consumer reporter for USA TODAY. reach her at blinfisher@USATODAY.com or follow her on X, Facebook or Instagram @blinfisher and @blinfisher.bsky.social on Bluesky. Sign up for our free The Daily Money newsletter,which will include consumer news on Fridays.
