Late car payments in the US have hit a concerning milestone with 6.56% of subprime borrowers being at least 60 days behind on their auto loans since January. This troubling trend indicates the highest recorded delinquency rate in decades, as reported by Credit agency Fitch Ratings, which began collecting this data in 1994. The surge in overdue auto loans is primarily attributed to the escalating costs and high interest rates associated with vehicle financing.

Prime borrowers, on the other hand, have experienced a relatively minor increase in 60-day delinquencies, rising from 0.35% to 0.39% between January 2024 and January 2025. The data reveals that the challenging auto loan situation primarily affects individuals with credit scores of 640 or below. While data for February is pending, historical trends suggest that delinquencies often peak during this month before subsiding in March and April.

The escalating financial burden of car ownership extends beyond loan costs, with insurance premiums also on the rise. In 2024, insurance rates surged by 16.5%, following a 12% increase in 2023. Projections indicate that insurers are likely to raise costs by an average of 7.5% in 2025, as stated by PR Newswire. Moreover, according to Cox Automotive data, the average price of a new car has climbed to $48,641 this month, up from $47,218 in March 2024, signaling a continuing upward trend. Although luxury vehicle prices have decreased, with brands like Tesla, BMW, and Lexus offering lower prices in February, the overall costs of owning a vehicle, especially in the pickup truck and SUV segments, have become prohibitive for many Americans.

Another financial challenge faced by car owners is the pressure to purchase additional products or services related to auto loans, such as extended warranties. Dealers often include these offerings in paperwork without transparent discussions, making extended warranties a significant revenue stream for auto dealers.

For individuals struggling with late car payments, Mitria Spotser, the vice president and federal policy director at the Center for Responsible Lending, recommends proactive steps to address the issue. Calling the loan servicer to arrange delayed payments or loan extensions can help prevent vehicle repossession. Refinancing the car at lower interest rates or extending the loan period are also viable options to manage financial difficulties.

It is crucial for borrowers to document any agreements, such as loan extensions, to avoid surprises, as repossession contractors are not obligated to provide notice before seizing a vehicle. A vehicle repossession can significantly impact one’s credit report for up to seven years, emphasizing the importance of timely communication with loan servicers to avoid such consequences.

In conclusion, the escalating number of late auto loan payments in the US underscores the financial strain faced by many borrowers. Awareness of the challenges and proactive measures, such as refining loan terms or seeking assistance from loan servicers, can help individuals navigate through these difficult circumstances. It is essential for car buyers to conduct thorough research and avoid unnecessary add-on services when purchasing a vehicle to mitigate potential financial burdens.

—

Original Source: AutoBlog [Link to the original article with rel=”nofollow”]

Keywords: late car payments, subprime borrowers, delinquency rate, auto loan trends, rising costs, financial challenges, insurance premiums, extended warranties, loan servicer assistance, vehicle repossession