As pandemic stimulus money has run out for many Americans, debt is starting to mount again and it is leading to signs of trouble, particularly in the auto industry where car repossessions are on the rise.
“The national average that they’re expecting for repossessions for 2022 is around 2.2 million, so when you go back to 2019 at the 1.7 million mark, sure, that’s a relatively large increase,” said Chris Benson, vice president of collection at Ent, a credit union with around $7 billion in assets.
Data published in May by the New York Fed shows auto debt in our country rose by $87 billion in the year ending in March 2022.
Benson says some of that rise can be attributed to the used car market as car values rose by more than $10,000 over the course of the last year, but some of it can also be attributed to the liberal spending practices afforded to some by the pandemic.
“You know, looking at the last two years, you have to take into consideration the government assistance programs that were available to members, repossession and foreclosure moratoriums, stimulus funds. I think that had a big impact on keeping delinquency charge off, repossession, and foreclosure at minimum,” said Benson
There is no federal database that tracks auto loan default or repossession numbers, but there are entities that take snapshots. In June, Ford’s CFO said delinquencies were increasing, and in August, the auto-news site Jalopnik did an analysis that showed car repossessions are up 11% among subprime borrowers since 2020 and have doubled from 2% to 4% among prime borrowers, or those with good credit scores.
Benson says if you find yourself in a difficult position with a loan to be fully transparent with your lender. He says there are workarounds like lowering the amount you pay monthly or pausing the loan for a short amount of time while you get your finances in order.