Car repossessions are on the rise, and financial analysts fear the trend will continue, according to a report.
The auto loan industry looks much 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 those behind on their payments, NBC News reports.
The number of people behind on their car payments has approached pre-pandemic levels in recent months. For consumers with the lowest income, the default rate now exceeds 201[ads1]9, according to data from the rating agency Fitch.
The 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 is up 26% since 2019 to $718 a month, the report said. 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 could afford to pay $500 or $600 a month two years ago, but now everything else in their lives is more expensive,” said Ivan Drury, director of insights at car-buying website Edmunds. “That’s where we start to see the takeovers happen because it’s just everything else that starts to stick with you.”
Some noticed that the number of repos increased earlier this summer. Joey Poliszczuk operates Phoenix-area companies Hoist Towing & Recovery and Gorilla Towing & Recovery. He told FOX 10 back in July that he thought the shaky economy meant foreclosure numbers would continue to rise.
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“The percentage of defaults and foreclosures is not expected to reach the levels of 2008 and 2009, when there was an increase caused by the financial crisis. The percentage of auto loans that were 30 days past due was 2.2% in the third quarter compared to 2.35% in default in the same period in 2019, according to data from Experian. In contrast, just over 4% of auto loans defaulted in 2009,” NBC News stated.