More People Are Late on Car Payments Than in the Last 30 Years

Recently, the number of people who are late on their car payments has gone up to the highest it's been in over 30 years. A lot of people with lower credit scores, also known as subprime borrowers, are finding it especially hard. 

A study shows 6.56% of these borrowers were more than 60 days late on their car loans in January. This rate has stayed above 6% since August 2024, which hadn’t happened before.

This increase in late payments comes at a time when everyday living costs have gone up because of high inflation, which means things cost more and it's harder to stretch a dollar. Interest rates have also risen, making it more expensive to get a new car loan.

The Federal Reserve Bank of New York found that total money owed in auto loans has been climbing and jumped by $48 billion in 2024 due to more people getting new car loans. 

They noticed that more people, across all types of borrowers, are struggling to keep up with their payments compared to before the pandemic.

While household debt like mortgages are being managed well, car loans are causing more trouble for people. High car prices and increased interest rates mean people have to pay more each month, which is tough for many, particularly those with lower incomes or less perfect credit scores.

In some cases, people who went for used cars when prices were very high now find themselves owing more on the loan than the car is worth, which can make it even harder if they need to sell or trade the car.

The New York Fed also noted that as of the end of 2024, 3% of all car loan borrowers were at least 90 days behind on payments, the highest since 2010.

Check out: Navigating Auto Loan Debt Relief: Finding the Best Solution for You

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