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Auto loan delinquencies rise as government aid ends in pandemic era

With inflation and rising prices still a factor across the country, an increasing number of Americans are struggling to make their monthly car loan payments.

A new report from TransUnion released on Tuesday found that 1.65% of loans in the third quarter were at least 60 days past due. This is the highest rate of 60-day delinquencies in more than a decade. Subprime borrowers, or those with lower credit scores and generally lower incomes, are struggling the most.

TransUnion tracks more than 81 million auto loans across the country.

“Consumers always want to stay in the know as best they can,” Satyan Merchant, senior vice president of TransUnion, told CNBC. “It’s just that this inflationary environment makes it difficult.”

“That leaves less money in their pockets to make the car loan payment because they have to pay more for eggs, milk and other things,” Merchant said.

The increase in delinquencies coincides with the end of loan-accommodation programs that began during the COVID-19 pandemic. These programs were intended to help unemployed people avoid repossessing a vehicle because they could not make the monthly payments.

TransUnion reports that about 200,000 loans that previously used these units are now 60 days past due. The credit company says about 100,000 loan accounts that are more than 60 days past due remain in pandemic-era programs.

“There was this effect where delinquency that may have happened over the last few years is really pushed back or delayed because that consumer didn’t have to make payments, or their status was on accommodation. So now some of them are knocking,” Merchant said.

Merchant said the auto loan market remains healthy, despite the growing number of delinquencies and low unemployment is helping at the moment. Higher interest rates and average transaction prices are prompting many new borrowers to take out longer-term loans, over seven years, to help lower monthly payments.

“If we get into a position where employment starts to be a challenge in the United States and unemployment goes up, that’s when the industry will really start to worry about the ability of a consumer to repay their auto loans,” Merchant said.


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