Millions of Americans are finding it virtually impossible to keep up with their car payments, despite supposed “economic growth” and low unemployment, according to Reuters. In fact, more than 7 million Americans are already late by 90 days or more on their car loans, according to data from the New York Federal Reserve, as delinquency rates among borrowers with low credit scores have seen the fastest acceleration.
Part of the issue stems from the economic downturn a decade ago where automakers slashed production. This has made a rarity of 10-year-old used vehicles, which are typically the cars sought out by low-wage earners.
This lack of supply and rising demand has caused prices to spike, with the average price of a 10-year-old used vehicle coming in at $8,657, nearly 75% higher than 2010, which is “pushing poor Americans over the edge” according to Reuters. Over the same time, the average increase in new car prices is only 25%.
Ivan Drury, Edmunds’ senior manager of industry analysis, said that “this is pinching people at the worst point possible. If you need basic A to B transportation, you have to get an older car that needs more repairs and has more wear-and-tear issues.”
Monthly auto payments for Americans that make under $40,000 per year have remained flat since 2017. Those in higher wage brackets have seen payments rise. But rather than this being good news, it indicates that poor Americans are stretched so much that they literally can’t afford to pay more. As Cox chief economist Jonathan Smoke pointed out, “they just don’t have any flexibility to increase their payment.”
And the rising delinquency rates are being blamed on weaker lending standards in recent years.
Warren Kornfeld, a senior vice president on Moody’s financial institutions team, said: “Auto lenders are belatedly tightening lending standards, but it may already be too late. The economy is masking the true performance of auto loans. If we hit a downturn today, the performance of auto loans would not look very good.”
New York Fed data shows that delinquencies among subprime borrowers have been rising and have been the catalyst pushing up the overall delinquency rate. About 8% of loans originated by buyers with a credit score under 620 are categorized as seriously late. Fed researchers called this data “a development that is surprising during a strong economy and labor market.”
Gordy Tormohlen of Good People Automotive says that business is up 10% this year as auto finance companies have been tightening lending standards. Ominously, he said “the market feels like it did before the financial crisis hit in 2008, when consumers were over-extended with debt.”
Customers of his include people like Hollis Heyward, who recently had to rework his loan and is now only paying $120 per month to pay off his principal owed, down from about $350 a month. And it doesn’t look like there will be good news anytime soon: analysts are predicting that it could take years for older used cars to return to more affordable levels.
Ken Shilson, president of the National Alliance of Buy Here, Pay Here Dealers (NABD), said:
American consumers have become too comfortable with debt and subprime customers have been “poisoned” by easy access to capital for much of the long economic expansion. But he added those customers will be forced by tighter underwriting to seek even older vehicles.
“The American way is to always live beyond your means and Americans aren’t good at making life adjustments,’ Shilson said. “But there’s a reality check coming and many subprime buyers will be forced to find more affordable transportation.”
Just days ago, Bloomberg reported that “sticker shock” was the cause for growing stress in the automotive industry.
Auto dealer Robert Loehr said of new car prices: “Prices are crazy on cars nowadays — all of them. They’re crazy to me, and I do it every single day, all day long,”
Brian Irwin, who leads the automotive and industrial practice for consulting firm Accenture, says the auto industry has reached the end of its run, stating: “It’s a step down from where we thought we would be a few months ago. I expect to see stronger incentives coming out.”
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“…as delinquency rates among borrowers with low credit scores have seen the fastest (sic) acceleration…”
You don’t say.
Perhaps there is a connection?
The cost structure of America is too damn high. Could it be because of 1) artificially caused supply and 2) regulations?
Donkey, Most of it is to do with monetary shenanigans going back (with malice aforethought) many decades. Working, productive Americans are losing purchasing power every day, while the thing they must buy to have a decent life (basic transportation, housing in a safe neighborhood, the ability to save some income for retirement, etc) are made more expensive, o purpose, to make them more dependent and less free. Supply and regulation are components, used to achieve the goal of virtual slavery.
I agree, but only so much. Tell me why a cheap car cannot be produced with older technology. Know why? Because the government will not allow it. New cars must have whatever the government says it must have. Thus increasing costs beyond reach.
Government regulations raise the costs of vehicles, fuck you CA! Unions suck and the car makers are spineless hacks. Well passing along costs to the consumer has reached the end of can kicking. Eg $75K for a new Ford Super Duty and $50K for a used truck with 100K on the odometer! Utterly unsustainable. Wages need to rise but the Fed will cause a recession before that happens and the car companies will get bailout again! Can we at least pretend to try a free market?
Bill Shit Hammerhead , high blue collar union wages made the American middle class what it was and the circle jerk of Wall Street to K-Street to Capitol Street have enriched themselves while hollowing out the core industries that created a consumer union wage middle class that is now bankrupted . The signs of decay are everywhere except in the halls of government and the mansions of the investor class that now own government and the minions once considered representatives who are now game show hosts owned by the highest bidder
Yeah the greedy unions could not keep up with the rest of the world’s productivity….and capital flows to the best return…you (I am assuming you are a low IQ union asshat based on your comment)..killed your own fucking companies! Don’t blame Wall Street or anybody but your own self…..If I can make more money going through a crazy effort to make shit elsewhere….you are a greedy little pig. Sorry, that is just reality.
I have Molly Maguire’s on my Mick side, coming up all the men in my family were blue collar Union men, vets to boot. I proudly carried my first Union Card at 16, and held four more in closed shops in New Jersey, until I cut loose moving to Texas, voting for good with my feet. Gave up Union bennies, seniority promotions, and a cushy job at a Big Pharma company
One union job was at Delco Remy just out of the military. Worked Small Parts, double wheel, one man assembly line. Three times I was cornered by the shop steward and told to slow down and significantly cut my production…I was making the rest of the department look bad. The last time in no uncertain terms.
At the Big Pharma Company I watched too many entry level and above idiots who could barely push a broom get Union pay (decent wage outstanding bennies) and do everything they could to fight management, do as little work as possible, punch each other in and out, steal anything that wasn’t bolted down, and even commit sabotage for the hell of it. I watched crooked union elections, and slimy union stewards and above act like barons and earls, while they used and abused their positions.
My wife worked a Union job at Charles of the Ritz. She said the guy who came in to pick up the Union dues was an overweight Guido right out of the Godfather.
I know history, I know who the Robber Barons evolved into, I know how the working people were used, abused, underpaid and overworked and why Unions were desperately needed…once upon a time…but that time has passed.
It’s obvious who the pig is in this debate . The tax base from union scale wages built schools paved roads paid police and fire services made power plants water and sewage systems and now all are running on fumes created by debt devaluing currency thanks to shopping cheap labor you save a few bucks and a free Republic circles the drain but WTF a small percentage are doing great along with those connected few
Anonymous,
I lived it, worked it, and saw it on the inside – too many unions helped kill the gooses that were laying the golden eggs.
Now, there is another angle to the dangle that sickens me, and I have posted about it many times. It brings in the common enemy we all face. The Luciferian Globalists knew they had to hollow out the American Middle Class and shrink American Unions for their New World Order. I believe the unions were blind, and played right into their hands.
When Kissinger (Nixon’s handler and a Rockefeller lifelong operative) opened China in the 70’s the Rockefellers, who had taken control of the Council on Foreign relation (CFR) away from the Rothechilds in the 50’s, led at that time by David the demon, provided tax free loans to China that they used to build the factories that all the American high paying union jobs were transferred to.
The Rockefellers funded the demise of the American Unions – but the unions also helped by going too far in their demands, their productivity declines or limits, and their adversarial relationships with the gooses.
Of course this transfer of jobs was assisted by our bought and paid for politicians of both parties, but especially by the Democrats, and especially by Bill Clinton.
You and Hammer are both right in much of both your posts.
Divide and conquer has always been a successful tactic.
I was going to give the other side…but you freaking nailed it! Judo the art of using the opponent’s momentum against him….you got to hand to the globalist fucks they played the Unions and the rest of America like a Stradavarius…..Old Anon is too dim to understand that he was the catalyst that justified the wholesale rape and pillage of America….and they even got him to blame anybody but the right people…..wake up! If we accept the globalist rules to play by we lose……It is not left vs. right it is DC/Globalist vs. the rest of Us!
Hammer,
Have you read ‘Killing Uncle Sam’ yet?
It connects a lot of dots.
Yea man, Judo was my thing until I tore cartilage in my chest…twice. Now I just pack heat.
Duh, more Unintended Consequences of today’s Reconstruction. The USDA (or some related agency) hired professionals to fence all my Black friend’s land including many gates, plowed and seeded it, and installed a half dozen automatic water troughs and the piping for livestock because he is an “underprivileged farmer”. He paid about 10% of the cost. I think the Small Business Administration does likewise for franchises for minorities (fast food, printing shops, home services, car lots, etc), and the Fed “Repos” the subprime car, home, small business, and student loans that banks make to minorities. Besides violating the 14th Amend (Equal under the Law), this inflates consumer prices, deflates the taxpayers earnings, and creates a large sultry Peter Principle privileged liberal voting class of Useful Idiots that the Deplorables in Fly-over country are having to pay dearly for.
Tell me about those sky high used car prices!
I’ve been looking for a 1972 Chevrolet Monte Carlo SS in triple black and a 427 4bbl. Would consider a 396 or even a 350. Preferably with a leather interior. No vinyl top under any circumstance, please.
Fuggeddabouttit — prices are simply outta sight and then there is the insurance shakedown.
I could envision, purely for the good of the ‘Murican People’ you understand, The Donald pulling a Barry O. with a “cash for clunkers” program with a generous $10,000 incentive; O.K. O.K. make it $20,000 to sweeten the deal, to trade in the old piece of junk for a new, more efficient, import from say China. Smooth out those trade rumbling with The Middle Kingdom, which would in turn calm the stock market down enough to permit a Dow Jones Industrial Average of at least 30,000 on The Man From Queens’ watch. We don’t need a greater depression while Orange Man Bad is president, now do we?
Roll the program out say 15 September 2020 until 15 Nov 2020 should he not be impeached. Senators Collins, Feinstein and Schumer would be certain to vote for it……as well as for a conviction of the Chief Executive. Having their cake and eating it too and all that.
Had a couple mid-70’s Monte Carlos in my day. Always liked them and as I recall so did the girls. Ha..the hood was about a city block long. Great American car.
I found 2 great 1970/72 Montes. 1 was $12,000 and the other was $15,000. I too want to get one but after customizing it to what I want (I want an old pre-computer/smog daily driver), it would be in the $50,000 range. And that’s just putting in a modern drivetrain, modern suspension, tires and wheel and upgrading the interior.
Used car prices aren’t soaring. Bad credit risks are soaring.
Amen to this article. I wrecked my Daily Driver Pickup about 2 years ago and have been looking for a replacement with no such luck. A new Pickup is out of the question (Come on Ford, $75,000 for a new Pickup?!?!) and used Pickups are high also plus they have crap on them that I don’t need or want. Oh well, I well just keep my eyes out for what I need but it sure gets aggravating and frustrating!!!
Ahaha! https://pjmedia.com/trending/electric-car-owners-shocked-by-california-blackouts/
Come on people ! You are going to have to lower your expectations. Get yourself a brand new Toyota Corolla for 15,000 and be happy. That ride will last you forever if you take care of it.
My 1992 Honda Accord EX is running better than ever!
So is my 2000, same model as is my 2000 Mazda (Ford Ranger) B-300 pick up.
2004 mitsu lancer here. Largest repair in 15 years? Left brake light burnt out. BTW Mark, enjoyed the Italian Fire Brigade joke as did the other 2 old cockbites I sit with at the dog park every morning. All 3 of us laughed our asses off.
Bob,
I grew up around a bunch of old country Ginzos…I was almost five before I realized my first name wasn’t…Stupido.
Anisette in their morning coffee and in their hand rolled black cigars.
Semper Fi
The newest vehicle I own is a 89 Full Size Bronco.
It’s on it’s last legs and needs an engine overhaul.
9 mpg, get the hell out of my way, it’s insured.
My other rig is a 83 GMC Caballero with a V-6. The Caballero is almost identical to the El Camino. It gets 22 mpg.
The Wifely Unit has a 2004 Ford Focus. We paid $2,500 cash for it.
I would be money ahead to throw a rebuilt engine in the Bronco compared to trying to find a decent used pick up.
When people are spending well over what I paid for a little house back in the 90’s for transportation then you know things are unsustainable.
Don’t even get me started on the housing market.
Something has to give and it will just as sure as the Sun rises in the East.