Americans love their cars. We purchased about 17 million new ones last year, just below the record number we bought in 2018. And it’s not just new cars. We purchased over 40 million used cars in 2019. But some of us are having trouble paying for them.
The New York Federal Reserve just reported that car loans and leases outstanding reached a record $1.33 trillion. While prime borrowers, those with good credit, are doing fine, sub-prime borrowers are having trouble making their payments. Among those with credit scores below 620, 4.94% are at least 90 days late, or seriously delinquent. That’s a 15.5% increase from 2018, and very close to the all-time high reached during the financial crisis of 5.27%.
Here’s the kicker. This is happening while unemployment sits near 50-year lows and wages are moving higher. What happens when the economy takes a breather, perhaps because of the global slowdown due to the coronavirus, as we try to pay for unsustainable social benefits and state pensions?
It could get ugly out there.