Americans Are Defaulting on Car Loans at an Alarming Rate
Across the US, people are increasingly defaulting on their car loans — a dire economic indicator because these loans are usually the last payment Americans are willing to miss. Meanwhile, auto insurers are raking in record profits after hiking rates.
Unlike defaulting on a rent or a mortgage — where tenants and homeowners can have months of legal proceedings before they’re evicted — vehicles can be repossessed in a matter of days, leaving car-dependent Americans stranded. (Frederic J. Brown / AFP via Getty Images)
Across the country, people are increasingly defaulting on their car loans — a particularly dire economic indicator because car loans are usually the last payment that Americans are willing to miss.
As the economy stagnates and both cars and car insurance have become more expensive, new research from the consumer-protection-focused nonprofit Consumer Federation of America (CFA) shows that executives from top auto insurance companies are netting massive compensation packages.
The average price for a new vehicle topped a record-breaking $50,000 in September. Meanwhile, auto loan delinquency rates are at all-time highs for those with subprime credit ratings — those with credit scores below 670 — doubling since 2021 to reach 6.43 percent. The default rate is now worse than during the last three recessions: the COVID-19 pandemic, the Great Recession, and the dot-com bust.
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