Auto Loan Delinquencies rise, Signaling Broader Economic Concerns
WASHINGTON – โA growing numberโ of Americans are falling behind on their auto loan โคpayments, a โtrend โexperts warn could foreshadow wider economic difficulties. Delinquency rates โare climbing, โขraising concerns about consumer financial health and potential โripple effects across the economy.
Recent data indicates a notable increase in borrowers 30-60 days past due on their auto loans. โAccording to theโข 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 โขis alarming to economists.
“We’re seeing a clear signal โthat financial stress is building among consumers, and auto loans are ofen โฃone of the first places it shows up,” said โขMark Zandi, chiefโฃ economist at moody’s Analytics. “As other debts become โฃmore burdensome, โฃpeople tendโค to prioritize necessities โฃlike housing โand food, and auto payments can fallโข behind.”
The rise in delinquencies is โขespecially pronounced among younger borrowers and those with lower credit scores, who are frequently enough saddledโ with higher โคinterest rates. Erinn Compton, a substitute teacher,โฃ experienced this firsthand. she lost her car and later her apartment and job after falling behind onโ payments due โto a high-interest auto loan in 2023, leadingโข to a period of homelessness. “Although my story is complex, the solutionsโ are โeasy to solveโ these continuous cycles of burden for any โand everyone,” Compton told USA TODAY. “Our contryโ is in a โstate of crisis from not just bigโ things but also these everydayโข little things that are overlooked by the โคhighest levelsโ and wealthy corporations that don’tโ have to feel it directly.”
Several factors are contributingโฃ to the increase in โauto loan delinquencies.โข Inflation,while cooling,continues toโ strain householdโ budgets.Rising interest rates, implemented by โtheโ Federal Reserveโข to combat inflation, have made borrowing moreโ expensive.Additionally, the end of pandemic-era forbearanceโค programs โandโ studentโข loan payment restarts are adding โขto financial pressures.
Consumer advocates are calling for โgreater government oversight and consumer protections. Rosemary Shahan, president of Consumersโ forโ Reliability and Safety, stated, “People are hopelessly outgunned โคwhen they go โฃto a car dealer,” adding that “the agencies that are there to protect us at the Federal โlevel have abandoned consumers.”โ
The โฃpoliticization ofโ federal agencies tasked with consumer protection, โคsuch as the Federal Trade Commission, is also raising concerns. Biden-appointed commissioners have faced โremoval by the Trump governance,potentially โweakening consumer safeguards.
The trend in auto loan delinquencies is beingโฃ 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 orโฃ follow her on X, Facebook or Instagramโฃ @blinfisher and @blinfisher.bsky.social on Bluesky. Sign upโค for our free The Daily Money newsletter,which will โขinclude consumer โnews on Fridays.
