According to a report, car repossessions are on the rise and financial analysts fear this trend will continue.
The auto loan industry looks very different than it did at the start of the pandemic, when Americans got a boost from stimulus checks and lenders were more willing to accommodate delinquent payments, NBC News reports.
The number of people in arrears on their car payments has been approaching prepandemic levels in recent months. For consumers on the lowest incomes, loan defaults are now higher than in 2019, according to data from rating agency Fitch.
This trend is expected to continue into 2023 as economists expect unemployment to rise, inflation to remain high and household savings to decline.
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The average monthly payment for a new car has increased 26% since 2019 to $718 per month, the report states. Nearly one in six new car buyers spend more than $1,000 a month on vehicles, and the costs associated with owning a car, including insurance, gas, and repairs, have skyrocketed.
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“These repossessions are happening to people who two years ago could afford that $500 or $600 a month, but now everything else in their life is more expensive,” said Ivan Drury, director of insights at car buying website Edmunds. “That’s where we start to see the repossessions happen, because it’s just everything else you start to pin down.”
Some noticed an increase in repos earlier this summer. Joey Poliszczuk runs Hoist Towing & Recovery and Gorilla Towing & Recovery businesses in the Phoenix area. He told FOX 10 in July that he believed the unstable economy meant the number of repossessions would continue to rise.
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“Defaults and repossessions are not expected to reach levels seen in 2008 and 2009, when they peaked due to the financial crisis. The rate of auto loans past 30 days in arrears was 2.2% in the third quarter compared to 2.35% delinquent over the same period in 2019, according to data from Experian.In contrast, just over 4% of auto loans defaulted in 2009,” according to NBC News.