Auto loan payments are highest on record, sometimes at mortgage level
To this assessno one will show interest in loans.
The average monthly payment on a new car loan hit a record high of $686 in June, according to new data from auto marketplace Edmunds, up 4% from January and 13% year-on-year. With it, the risk of delinquency increased dramatically.
Look at a thousand dollars
Call it a case of a double whammy. A shortage of new vehicles caused by pandemic-era supply chain backlogs has driven car prices up – in May, the average transaction price of a new vehicle rose 13% year-on-year to reach $47,148, according to Kelley Blue Book. On top of that, interest payments are higher because the Federal Reserve is engaged in a rate hike duel with inflation – the average annual rate on a new car loan last month was 5.2 %, compared to 4.4% in February, according to Edmonds.
In short, this explains why some monthly car payments are on par with renting a tiny studio apartment, and why more drivers are missing out on payments:
- A record 12.7% of people who took out a new car loan last month agreed to a monthly payment of at least $1,000, according to Edmunds. This is almost double the 7% of a year ago and more than six times the 2% of 2010.
- Lucky Lopez, a car dealer specializing in repossessed vehicles, said Barrons that the share of subprime auto loans that result in foreclosures has nearly doubled since 2020 to 11%. Overall, 5.36% of subprime auto loans were seriously delinquent in May, 138 basis points higher than a year ago, according to Cox Automotive. Even more concerning, Lopez said, is that prime repossessions when borrowers have high credit scores are at a rate of 4%, double the usual 2%.
Reverse: As the volume of auto loans taken out declines, fewer loans equal more debt, according to Equifax. The 6.8 million auto loans and leases taken out this year in May were 8.9% lower than last year, but totaled $201.5 billion, a 7.6% increase in balances .
Bad grade from the teacher: According to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index, which measures a median household’s ability to pay for an average-priced car, in May it took a record 40.6 weeks to purchase one. . So as soon as you own it, a new model will come out – now you know how Apple computer owners feel.