Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

A Record Number of Americans Are Delinquent on Their Car Payments

  by    0   0

A record number of Americans have fallen behind on their car payments.

On Tuesday, the New York Federal Reserve released its Household Debt and Credit report covering the fourth quarter of 2018. Not only has indebtedness hit record highs, eclipsing levels seen on the eve of the Great Recession, but Americans are also having a harder time paying their bills. This is particularly apparent in the US auto market. According to the New York Fed report, more than 7 million Americans have fallen at least 90 days delinquent on their auto loans.

That’s more than 1 million higher than the previous peak in auto delinquencies back in 2010, at the height of the financial crisis.

New York Fed said performance in the auto loan sector is “slowly worsening.”

Growing delinquencies among subprime borrowers are responsible for this deteriorating performance, and younger borrowers are struggling most acutely to afford their auto loans.”

But aren’t we supposed to be in the midst of a “great” economy? As Peter Schiff put it, “I guess people are doing so well in this booming economy that in all their excitement they forgot to make their car payments, three months in a row!”

To ask the obvious question more directly: If the U.S. economy is really so great, and good jobs so plentiful, why are a record number of Americans delinquent on their car payments?

According to an economist at the New York Fed, “The substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labor market and warrants continued monitoring and analysis of this sector.”

In some ways, the auto market over the last decade parallels the housing market during the runup to the 2008 crash. As the Fed pushed interest rates down to the zero bound and held them there and launched three rounds of quantitative easing, easy money flooded the marketplace. It wasn’t long before auto lenders were handing out money to riskier and riskier borrowers and a robust subprime auto market developed.

That began to unravel last spring as the Federal Reserve nudged interest rates higher. As we noted in a report last April, “Small subprime auto lenders are starting to go belly-up due to increasing losses and defaults.” And a Bloomberg report noted that not only were subprime auto lenders facing tough business conditions, there were also allegations of fraud and under-reporting of losses.

Growing numbers of small subprime auto lenders are closing or shutting down after loan losses and slim margins spur banks and private equity owners to cut off funding. Summit Financial Corp., a Plantation, Florida-based subprime car finance company, filed for bankruptcy late last month after lenders including Bank of America Corp. said it had misreported losses from soured loans. And a creditor to Spring Tree Lending, an Atlanta-based subprime auto lender, filed to force the company into bankruptcy last week, after a separate group of investors accused the company of fraud. Private equity-backed Pelican Auto Finance, which specialized in ‘deep subprime’ borrowers, finished winding down last month after seeing its profit margins shrink.”

That Bloomberg report went on to point out that the pain among small auto lenders “parallels with the subprime mortgage crisis last decade, when the demise of finance companies like Ownit Mortgage and Sebring Capital Partners were a harbinger that bigger losses for the financial system were coming.”

Even with the surge in delinquencies, auto finance companies continue to make loans. Total auto debt rose $584 billion in Q4 2018, according to the New York Fed report.

That’s because average consumers can’t afford to buy a car. Remember how the price of houses climbed through the roof in the years before the 2008 crash? Easy money has a way of pushing up prices.

ZeroHedge compiled a number of statistics that reveal just how unhealthy the automobile market in the US has become.

  • The average price for a new vehicle is at a record high $31,099.
  • The average price of a used car is a record high $19, 589.
  • The average monthly payment for new and used cars has hit a record high of $515 per month.
  • The average auto loan has hit a record high of 69 months.

Notice the theme here — record high.

ZeroHedge summed it all up.

Cheap credit leads to easy lending conditions, and record prices as everyone floods into the market with lenders hardly discriminating who they give money to.”

And then the bubble pops.

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

European Central Bank Takes Bond Market Manipulation to the Next Level

Peter Schiff recently explained how the Federal Reserve has rigged the US Treasury market. Well, the European Central Bank has taken bond market manipulation to the next level. According to a Bloomberg report, the ECB is buying bonds to control the yield spread between debt issued by various EU countries. As a result of this […]

READ MORE →

Indian Gold Market Shows Signs of Revival

India ranks as the second-largest gold consuming country in the world, second only behind China. But over the last couple of years, the gold market in India has languished due to a combination of record-high gold prices in rupee terms and the economic impacts of the coronavirus pandemic. But were signs of revival in the […]

READ MORE →

ETFs Charted Record Gold Inflows in 2020; Holdings Hit All-Time High

Gold-backed ETFs recorded record net gold inflows, pushing holdings globally to record levels in 2020. On net, ETFs globally added 877 tons of gold last year worth about $47.9 billion. Gold holdings rose by over one-third, ending the year at a record 3,752 tons, according to data released by the World Gold Council.

READ MORE →

US Government Runs Biggest December Deficit in History

The US government ran the biggest December budget deficit in history last month. The December budget shortfall came in at $143.6 billion. That compares with a $13.3 billion deficit in December 2019, according to the Monthly Treasury Statement.

READ MORE →

Demand for Silver in Automobile Production Expected to Rise

Last month we reported that the surge in solar energy use could power a strong demand for silver. Now analysts say demand from another sector could also benefit the white metal. A report by the Silver Institute projects that the automotive industry will absorb nearly 90 million ounces of silver annually by 2025. That would […]

READ MORE →

Comments are closed.

Call Now