{"id":356692,"date":"2019-05-17T07:00:04","date_gmt":"2019-05-17T13:00:04","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=356692"},"modified":"2022-04-19T13:46:49","modified_gmt":"2022-04-19T19:46:49","slug":"auto-financing-pre-and-post-recession","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/lending\/auto-financing-pre-and-post-recession\/","title":{"rendered":"Auto Loan Delinquency Rates Spike to Great-Recession Levels"},"content":{"rendered":"\n
\"auto<\/figure>\n\n\n\n

According to findings published in CityLab, owning a vehicle\nis one of the most powerful economic advantages a person can have. The findings\nshow a correlation\nbetween car ownership and increased income<\/a>, with those who own a car making\nmore than three times as much as those without. In some areas of the country,\nsuch as Los Angeles, the average income of households with vehicles is as much\nas 10 times higher than households without. That said, while car ownership is\ncertainly necessary for getting to and from work, grocery stores, doctors’\noffices and daycare, is it really an indicator of financial success? Recent\nreports, which reveal that auto loan delinquency rates are worse today than\nthey were at the peak of the recession, suggest not. In fact, findings indicate\nthat car ownership may be the reason for so many households’ financial duress. <\/p>\n\n\n\n

Too Many Americans\nOwn Cars They Cannot Afford<\/strong><\/h2>\n\n\n\n

In the fourth quarter of 2018, the percentage\nof auto-delinquencies<\/a>\u2014loans that are more than 90 days past due\u2014soared to\n4.47 percent of total loan balances. This rate is the highest it’s been since\nthe first quarter of 2012 and just 0.6 percent lower than the peak of the Great\nRecession in Q1 2011. <\/p>\n\n\n\n

The number of Americans who are seriously delinquent on\ntheir auto loans are at an all-time high as well, soaring to well over 7\nmillion. That’s 1 million more borrowers who are three months or more past-due\nthan at the end of 2010, which is the peak of overall delinquency rates.<\/p>\n\n\n\n

\"man<\/figure>\n\n\n\n

What’s even more shocking are the numbers. Since the second\nquarter of 2008, the number of auto loans issued has only increased by 28\npercent, from 88 million to just 113.4 million. However, the outstanding debt\nhas nearly doubled in the past decade and now stands at a whopping $1.27\ntrillion. What these numbers suggest, says the New York Fed, is that not\neveryone has benefited from the strong labor market. <\/p>\n\n\n\n

Subprime Auto Loan\nDelinquencies Lead the Pack <\/strong><\/h2>\n\n\n\n

Though subprime borrowers hold just 22 percent of the total\nauto loan debt today\u2014down from the nearly\n31 percent in 2008<\/a>\u2014many financial analysts attribute the outstanding past-due\nbalance to this group of individuals. According to the Federal Reserve Bank of\nKansas City, though the delinquency rates are on the rise and have been since\n2015, the rise appears to be largely driven by subprime borrowers. <\/p>\n\n\n\n

Delinquency rates among those with credit scores of less\nthan 620 rose from 12.4 percent in 2015 to over 16 percent in the second\nquarter of 2018. This rate is right on par with the subprime delinquency rate\nat the end of the first quarter of 2010. <\/p>\n\n\n\n

The delinquency rates of prime borrowers\u2014who happen to\naccount for the majority of outstanding auto debt\u2014remain unchanged from the\nrecession and hover right around 0.3 to 0.4 percent. While some experts believe\nthese numbers show that subprime borrowers have a higher risk profile than\nprime borrowers, others believe longer loan terms and sky-high interest rates are\nresponsible for the vast number of default loans. <\/p>\n\n\n\n

High Interest Rates\nand Long Loan Terms Make Vehicles Unaffordable <\/strong><\/h2>\n\n\n\n

Many are quick to point the finger at subprime borrowers for\nhigh delinquency rates across any industry, claiming they are irresponsible\nwith money. However, several reports suggest that maybe lenders are the\nirresponsible parties. <\/p>\n\n\n\n

The vast majority of auto financing options geared toward\nAmericans with low income and poor credit scores are fundamentally\npredatory<\/a>. For instance, the average car loan for a prime borrower is 4.16\npercent for a new car and 5.68 percent for a used car. For a nonprime borrower,\nthat interest rate is slightly higher at 7.05 percent for a new car and 10.44\npercent for a used car. These interest rates are assuming a borrower agrees to\na loan term of 60 months. <\/p>\n\n\n\n

\n\n\n\n

THE AVERAGE CAR LOAN FOR A PRIME BORROWER –<\/strong>
4.16% FOR A NEW CAR
5.68% FOR A USED CAR
FOR A NONPRIME BORROWER – <\/strong>
7.05% FOR A NEW CAR
10.44% FOR A USED CAR<\/p><\/blockquote><\/figure>\n\n\n\n

\n\n\n\n\n\n

For a subprime borrower, the interest rate on a new car is\nas high as 11.35 percent. That rate skyrockets to 16.92 percent for a used\nvehicle. Deep-subprime borrowers can expect to pay between 14.07 and 19.81\npercent respectively for a new or used car loan. <\/p>\n\n\n\n

To give you an idea of just how much in interest one would pay\nas a subprime or deep-subprime borrower, take a $14,000 used vehicle with a\n60-month loan term for example. At 16.92 percent interest, the monthly payment\nwould be $347.43. At the end of the 60-month term, the grand total would be\n$20,840.15, which means one would have paid $6,840.15 in interest alone. <\/p>\n\n\n\n

For a deep-subprime borrower, the monthly payment would be\n$369.44. The total cost of the vehicle at the end of the loan term would be\n$22,165.97, which means the borrower would have paid $8,165.97 in interest, or\nmore than half the value of the new used car. <\/p>\n\n\n\n

\"woman<\/figure>\n\n\n\n

The worst part is that the average loan term is no longer 60\nmonths. In 2010, when interest rates on auto loans were more or less the same\nas they are today, the average\nloan term was 61 months<\/a>, with the longest average being 67 months. Today,\nthe typical\nloan length is 68 months<\/a>, with more and more borrowers opting for terms of\nup to 72 to 84 months. Longer loan terms invariably translate to higher\ninterest rates.  <\/p>\n\n\n\n

What to Do If You\nMade a Bad Credit Decision <\/strong><\/h2>\n\n\n\n

Did you get locked into a subprime or deep-subprime loan you\ncannot afford? If so, you’re not alone, and you are not as stuck as you think\nyou are. A credit repair company<\/a>\ncan help you fix your credit so that you can refinance for a lower interest\nrate and save some money. Contact CreditRepair.com today for a free credit\nevaluation.<\/p>\n\n\n\nCarry on the conversation on our social media platforms. Like and follow us on Facebook<\/a> and leave us a tweet on Twitter<\/a>.\n\n\n\n

Sources: <\/strong><\/p>\n\n\n\n

https:\/\/www.citylab.com\/transportation\/2019\/02\/car-ownership-climate-change-driving-poverty-economic\/582091\/<\/a><\/p>\n\n\n\n

https:\/\/wolfstreet.com\/2019\/02\/12\/subprime-arrives-auto-loan-delinquencies-spike-to-great-recession-levels\/<\/a><\/p>\n\n\n\n

https:\/\/www.kansascityfed.org\/en\/publications\/research\/mb\/articles\/2018\/auto-loan-delinquency-rates-rising<\/a><\/p>\n\n\n\n

https:\/\/www.carsdirect.com\/auto-loans\/what-is-the-average-interest-rate-for-a-car-loan-with-bad-credit<\/a><\/p>\n\n\n\n

https:\/\/www.cnbc.com\/2019\/02\/01\/auto-loan-rates-are-some-of-the-highest-in-a-decade-how-to-save.html<\/a><\/p>\n\n\n\n

https:\/\/www.edmunds.com\/about\/press\/average-car-loan-interest-rate-drops-to-record-low-edmundscom-reports.html<\/a><\/p>\n\n\n\n

https:\/\/www.valuepenguin.com\/auto-loans\/average-auto-loan-interest-rates<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

According to findings published in CityLab, owning a vehicle is one of the most powerful economic advantages a person can have. The findings show a correlation between car ownership and increased income, with those who own a car making more than three times as much as those without. In some areas of the country, such […]<\/p>\n","protected":false},"author":53,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[59],"tags":[437,167],"yoast_head":"\nAuto Loan Delinquency Rates Spike to Great-Recession Levels - CreditRepair.com<\/title>\n<meta name=\"description\" content=\"Findings indicate that car ownership may be the reason for so many households\u2019 financial duress.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.creditrepair.com\/blog\/lending\/auto-financing-pre-and-post-recession\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Auto Loan Delinquency Rates Spike to Great-Recession Levels\" \/>\n<meta property=\"og:description\" content=\"Findings indicate that car ownership may be the reason for so many households\u2019 financial duress.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.creditrepair.com\/blog\/lending\/auto-financing-pre-and-post-recession\/\" \/>\n<meta property=\"og:site_name\" content=\"CreditRepair.com\" \/>\n<meta property=\"article:published_time\" content=\"2019-05-17T13:00:04+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-04-19T19:46:49+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2019\/05\/Auto-financing-600x391.jpg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"CreditRepair.com\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.creditrepair.com\/blog\/#website\",\"url\":\"https:\/\/www.creditrepair.com\/blog\/\",\"name\":\"CreditRepair.com\",\"description\":\"We are the credit repair experts\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.creditrepair.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"ImageObject\",\"@id\":\"https:\/\/www.creditrepair.com\/blog\/lending\/auto-financing-pre-and-post-recession\/#primaryimage\",\"inLanguage\":\"en-US\",\"url\":\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2019\/05\/Auto-financing.jpg\",\"contentUrl\":\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2019\/05\/Auto-financing.jpg\",\"width\":2692,\"height\":1754,\"caption\":\"auto loan financing\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.creditrepair.com\/blog\/lending\/auto-financing-pre-and-post-recession\/#webpage\",\"url\":\"https:\/\/www.creditrepair.com\/blog\/lending\/auto-financing-pre-and-post-recession\/\",\"name\":\"Auto Loan Delinquency Rates Spike to Great-Recession Levels - 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