As Car Prices Rise, More Americans Are Falling Behind on Payments
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Americans are increasingly falling behind on their car payments.
The number of subprime borrowers behind on monthly payments has nearly doubled since May 2021, rising from 2.6% that month to 6.1% now, Bloomberg reported, citing data from the ratings agency Fitch.
The price of cars grew at the onset of the pandemic, and holding debt is more costly as the Federal Reserve has gradually hiked interest rates in an effort to bring down inflation.
Both of those factors put more pressure on people who borrow money to pay for a car.
The average monthly payment for a used car rose to a record $736 in the third quarter of this year, according to data from Edmunds. And the F reserve has hiked interest rates to 5.5%, up from 3.25% a year ago.
The increase in delinquent payments could be an ominous sign for the economy, even as job creation figures surpass expectations and consumers continue to spend.
This is “where we start to see the negative effects of macroeconomic headwinds,” Margaret Rowe, a senior executive at Fitch, told Bloomberg.
Car buyers can face repossession if they fall too far behind on car payments, which is a stain on their credit score.
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