How many Americans are missing car payments?
Recent data from Fitch Ratings found that 6.1% of subprime borrowers were delinquent, or at least 60 days past due, on their auto loan as of September — the highest share recorded by the credit rating agency since it first started tracking the figure in 1994.
In September, the percentage of auto borrowers who were at least 60 days late on their bills rose to 6.11%, according to a Fitch Ratings report obtained by FOX Business. That marks the highest default level in nearly three decades and is a notable increase from the previous record of 5.93% in January.
Key Facts. The 6.1% of borrowers behind on auto loans last month marks a surge from the 2.6% reported in May 2021, after the federal government significantly lowered interest rates in the wake of the Covid-19 pandemic.
About 43% of Americans take out loans to pay for their cars. The total amount of outstanding auto loans in the US exceeded $1.2 trillion in Q1 2020. In Q1 of 2020, the proportion of overall delinquent auto loans was 4.71%.
The rates of Americans behind on auto loan and credit card bills continue to rise — in fact, both are at the highest levels in more than 10 years. Rising delinquencies indicate that more people are in financial distress.
After a sustained period of price hikes, it may not be easy to keep up with debt payments. In fact, according to the latest LendingTree study, 29.6% of Americans in the U.S.'s 100 largest metros were behind on at least one debt payment between July 1 and Sept. 30, 2023. Here's what else we found.
About 4% of those with car payments paid over $1,000 monthly. Almost a quarter of those with car payments paid under $300. None of the people over 65 had car payments of over $1,000, while 7% of those between 35 to 44 did. Over 50% of the respondents aged 25-44 or 65 and over were paying between $301 to $500.
Slammed by interest rates, many Americans can't afford their car payments. A growing percentage of Americans are falling behind on their car payments, squeezed by rising auto loan interest rates, stubborn inflation and the end to federal pandemic aid.
Following recent increases in used vehicle loan rates, only households earning in the top 40% can afford the average used car, according to a new report from car ownership app Jerry, which describes an “affordability crisis that runs wide and deep.”
A new study released by LendingTree found 29.6% of residents in the nation's 100 largest metros were behind on at least one debt payment during the third quarter of 2023, and 27.3% had serious delinquencies that were over 90 days past due or more. More than a quarter, 26.2%, had debt in collections.
What is considered a high car payment?
According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%.
Car payment statistics
The average monthly car payment for new cars is $726. The average monthly car payment for used cars is $533. 39.20 percent of vehicles financed in the third quarter of 2023 were new vehicles. 60.80 percent of vehicles financed in the third quarter of 2023 were used vehicles.
In general, it's recommended to spend no more than 10% to 15% of your monthly take-home income on your car payment, and no more than 20% on your total vehicle expenses, including insurance and registration. Read on to learn how you can determine how much car you can afford based on your financial situation.
Even falling one payment behind is enough for a lender to repossess your car. Usually, a loan is two or three months behind before the lender initiates a repossession. At that point, the lender can seize the vehicle, often without warning, and then sell it to recover the loan balance.
A November 2023 Bankrate survey of 2,350 U.S adults finds that 49 percent of cardholders carried credit card debt from month to month, up from 39 percent in 2021.
Here's why so many Americans are under pressure. Collectively, Americans owe $1.13 trillion on their credit cards, according to a new report from the Federal Reserve Bank of New York. Higher prices have largely caused consumers to spend down their savings and lean on credit cards to make ends meet.
Average American Credit Card Debt
However, according to Transunion, this figure rose from $5,795 in January 2023 to $6,295 in January 2024. The average credit card interest rate on accounts with balances that assessed interest was 22.75% in November 2023, according to the Federal Reserve.
Average new car payment just hit a record $700 a month: Here's how to lower that price. The average new car payment has just hit $700 a month, with some paying $1,000. Some ways to lower that price. Remember just a few years ago when a car loan was $300 a month?
Example 1: A $10,000 loan with a 5-year term at 13% Annual Percentage Rate (APR) would be repayable in 60 monthly installments of $228 each. The actual payment amount and year-end balance will vary based on the APR, loan amount, and term selected.
But according to Edmunds, there's another reason why $1,000 monthly payments are becoming more common: Some buyers are taking out loans with shorter-than-normal financing terms to score a better financing deal, which means higher monthly payments. Endurance offers extended protection for your vehicle.
What is the average debt of an American family?
The average debt in America is $104,215 across mortgages, auto loans, student loans, and credit cards. Debt peaks between ages 40 and 49 among consumers with excellent credit scores. Washington has the highest average debt at $180,462, and West Virginia has the lowest at $64,320.
For some households, discretionary spending includes that shiny new car you've had your eye on. For others, a car is essential for work, etc. In a recession, auto sales decline significantly as many buyers back out of the market.
Millionaires Avoid Car Payments
And more importantly, 8 out of 10 millionaires buy their cars with cash and don't have a car payment to worry about. In fact, research done by Ramsey Solutions found that non-millionaires are twice as likely as millionaires to have outstanding car loans.
The 20/3/8 car buying rule says you should put 20% down, pay off your car loan in three years (36 months), and spend no more than 8% of your pretax income on car payments. As we go into depth to determine how realistic this rule is, you may consider whether it can actually help you budget for your next car.
Average monthly car payments for new, new leased and used vehicles jump year over year. The average car payment for a new vehicle is a record $738 monthly, according to fourth-quarter 2023 data from Experian — up 2.5% year over year.
