Car Repossessions In The U.S. Are Increasing Rapidly Due To High Monthly Payments

 A growing number of consumers are falling behind on their car payments, a trend financial analysts fear will continue, in a sign of the strain soaring car prices and prolonged inflation are having on household budgets.

Repossessions tumbled at the start of the pandemic when Americans got a boost from stimulus checks and lenders were more willing to accommodate those behind on their payments. But in recent months, the number of people behind on their car payments has been approaching prepandemic levels, and for the lowest-income consumers, the rate of loan defaults is now exceeding where it was in 2019, according to data from ratings agency Fitch. Industry analysts worry the trend is only going to continue into 2023 with economists expecting unemployment to rise, inflation to remain relatively high and household savings set to dwindle. At the same time, a growing number of consumers are having to stretch their budgets to afford a vehicle; the average monthly payment for a new car is up 26% since 2019 to $718 a month, and nearly one in six new car buyers is spending more than $1,000 a month on vehicles. Other costs associated with owning a car have also shot up, including insurance, gas and repairs. 

“These repossessions are occurring on people who could afford that $500 or $600 a month payment two years ago, but now everything else in their life is more expensive,” said Ivan Drury, director of insights at car buying website Edmunds. “That’s where we’re starting to see the repossessions happen because it’s just everything else starting to pin you down.”