A record 7 million Americans are 3 months behind on their car payments, a red flag for the economy

[octoberlib]

A record 7 million Americans are 90 days or more behind on their auto loan payments, the Federal Reserve Bank of New York reported Tuesday, even more than during the wake of the financial crisis.Economists warn that this is a red flag. Despite the strong economy and low unemployment rate, many Americans are struggling to pay their bills.

“The substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labor market,” economists at the New York Fed wrote in a blog post.

A car loan is typically the first payment people make because a vehicle is critical to getting to work, and someone can live in a car if all else fails. When car loan delinquencies rise, it is usually a sign of significant duress among low-income and working-class Americans.

The New York Fed said that there were over a million more “troubled borrowers” at the end of 2018 than there were in 2010, when unemployment hit 10 percent and the auto loan delinquency rate peaked. Today, unemployment is 4 percent and job openings are at an all-time high, yet a significant number of people cannot pay their car loan.

https://www.washingtonpost.com/business/2019/02/12/record-million-americans-are-months-behind-their-car-payments-red-flag-economy/

[Wounded Bear]

1. The Trump Slump is coming...

[MineralMan]

2. Three months? I panicked when my check didn't clear by the due date.

I called the bank that had my car loan and authorized them to pull the money out of my checking account. Of course, the check cleared a day later, but that just became the next month's payment.

Three months late on a car payment is a sign of economic crisis in a household. 7 million? Uh-oh...

[octoberlib]

7. Same here. At 3 months they're repossessing the car.

[FBaggins]

11. Most of these cars aren't financed by credit unions or banks

The auto-finance (e.g., "buy here pay here&quot companies have much higher rates (14-20% in some cases). This allows them to afford much higher default rates, but also makes them a little less likely to repossess - because the loan is more profitable if they can get you to make it current again.

Note to potential buyers - if the bank or credit union won't make the loan to you... you probably can't afford the car.

[TeamPooka]

14. the article does not say that. It mentions that dealer lending has a higher rate of failure but does

say that most of these 7 million cars are not financed by credit unions or banks.

It does say "Most of the people who are behind on their bills have low credit scores and are under age 30, suggesting young people are having a difficult time paying for their cars and their student loans at the same time."

[FBaggins]

18. I'm just putting 2 and 2 together

It's a MUCH higher default rate in the sub-prime auto lending market.

[Hassin Bin Sober]

19. When someone's car blows up Wednesday afternoon and they are in a dealership Wednesday....

.... night because they have to get to work Thursday morning what do you suggest they do? Say oh well, I can’t afford a car?


I used to be in the auto business. I saw the rotten cycle people get themselves in to - Buy a used car that doesn’t last the term of the note. Can’t pay for a car that ain’t running. End up with a repossession on their credit. Need a car so finance with a sub prime lender (14-20% would be a bargain, btw). That car blows up so you stop paying for it then end up with a wage garnishment from the sub prime lender. Then hello peter Francis Geraci. Bankruptcy number one. And then the next level of auto finance from a buy here lot.

I doubt most buy here pay here lots are reporting to the fed. But I could be wrong. Maybe some of the larger publicly traded companies.


From a dealership stand point what do you do with said young couple shows up in your lot looking for a car to get to work tomorrow? Tell them sorry you can’t afford a car? Or do you use every finance source available?

We need better jobs and much better public transportation.

[redstatebluegirl]

3. And a bunch of them intended to use their tax refund to get current.

Now the tax fraud that is the GOP tax cut is going to hit them and they will never be above water. This party is the scourge of the earth.

[MaryMagdaline]

4. Exactly!

and those who were furloughed will not be able to catch up

[BluesRunTheGame]

10. Yup, that was my first thought. n/t

[uponit7771]

20. +1

[jimlup]

5. Shhhh! Don't give away the scam...

[livetohike]

6. The warning signs are coming daily. The economy will enter

a recession and it will be up to a Democratic President to fix it as usual.

[TeamPooka]

15. while Republicans scream blooody murder about the deficits (that they created)

[livetohike]

17. Exactly. Same as it ever was. Just like the movie

“Groundhog Day”.

[happybird]

8. We paid rent late in Jan. and our landlord

said out of his 40 tenants, over half were late. He said he always has a few, and there have been times when there were several, but he's never had so many tenants behind all at once. Our upstairs neighbors just got evicted last week, too (hallelujah for us, they were horrible- but it sucks for them).

[TeamPooka]

16. When empathy meets karma. nt

[demosincebirth]

9. Too many low paying jobs without a chance to increase their incomes. One solution is to have card

check elections, only, to organize a union. Not a fix-all, but it sure would help in companies like Walmart, Target and other big box stores where many make close to minimum wage for years.

[JCMach1]

12. Counting on tax refunds to catch up on payments

But are they coming?

[Johnny2X2X]

13. Real wages are falling or stagnant

working people are falling behind in this economy. Inflation is eclipsing wage growth most quarters. Rent is at all time highs in most cities. Food costs are exploding. It's just really hard to make it right now for too many in what is supposed to be a good economy.

[uponit7771]

21. Wait, MORE people are missing their car payments than when the UE rate was 10% !?!? hmmmm

.... someones numbers aren't accurate when it comes to the UE rate.

I'm leaning towards the person who was took a 25 million dollar tune up for running a fake college