Auto Loan Delinquencies Surpass 2009

When 21-year-old Kobe Hatch walked outside his Chicago home in December and couldn’t find his 2013 Dodge Journey, he knew it had been repossessed. He’d been falling behind on payments for months.

Without a car, he couldn’t do his job as a delivery driver for Amazon and got fired. Now, he’s struggling to make his rent payments and can’t afford groceries, even with food stamps.
“It’s been very stressful for the past few months,” he said. “Inflation has really taken a toll on people.”

Hatch is part of a growing cohort of Americans facing auto repossessions, an ominous sign for the US economy. During the pandemic, a surge in used car prices forced buyers to take out bigger loans for their vehicles. The monthly payments seemed doable in an era of stimulus checks, a tight labor market, and surging stocks, but that’s changed for many people as inflation eats into their budgets and the job market cools.

Now, more Americans are falling behind on their car payments than during the financial crisis. In December, the percentage of subprime auto borrowers who were at least 60 days late on their bills rose to 5.67%, up from a seven-year low of 2.58% in April 2021, according to Fitch Ratings. That compares to 5.04% in January 2009, the peak during the Great Recession.

Source: Bloomberg