According to CNBC, as the auto loan debt has continued to increase, so has the amount of Americans who cannot pay their car payments. Recently, the New York Fed has released a record number of 7 million people who are at least 90 days behind on their car payments at the end of 2018. This number is a little more than 1 million more than the previous record, which took place in 2010.
This rise in the people unable to pay their car loans suggests that not everyone has benefited from the strong labor market and warrants. There is one bright side, as the overall level of credit has actually improved and rose by about 8% which suggests that auto loan stock is continuing to increase and becoming more high quality than it has in past years.
There have been more and more debt that continues to pile on. As the household debt has increased by $32 billion in the fourth quarter and student loan debts have risen to $1.46 trillion. But as credit inquiries fell to a record low in the recent Fed survey, it seems that Americans feel as though they do not need to bring on more debt. It will be interesting in the coming months to see if this survey will actually apply, or if we will see more and more debt continue to increase in the future.
Source: https://www.cnbc.com/2019/02/12/a-record-number-of-americans-are-90-days-behind-on-their-car-payments.html
4 comments:
Jack, interesting article you have here. The only thing that I was thinking while reading this was the bright side that compared to 2008, is that these cars arent as expensive as houses. Also, as long as no one is selling tranches of car loans into teacher pension funds we should be okay. In all honesty, this is a bit concerning and your point about how maybe not everyone is feeling the growth our country has been experiencing is very interesting. Hope this doesn't affect more people in the coming months.
American economy seems that it is in great shape when we observe the indicators like growth rate, unemployment, consumer confidence and so on. However internally the whole thing is quite unstable with all the debt that has to be resolved. Hopefully there is a solution to wipe out the debt so the economy is more stable and healthier. This seems like an issue that people can ameliorate by managing their income more wisely, although there most probably are factors that are inhibiting people from paying their car payments. We would have to observe the situation for a longer time.
Jack, while it may be slightly troublesome to see that even more Americans are behind on their car payments. It would be interesting to compare these rates to the rate of unemployment. Perhaps there might be some sort of correlation between the two, as unemployment rises (it has been decreasing, for the record), then late car payments will increase. Furthermore, I wonder how people prioritize their payments. Are car payments at the bottom of the list? Perhaps.
I do agree that it seems to be very troublesome that these are the number of people that are falling behind on debt in the United States. It is not indicative of how the US economy seems to be doing and I think it will be interesting to see if the Fed's survey will actually be telling of how the American people feel about falling behind on their debt payments both with auto and mortgage.
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