Subprime Auto Borrowers Fall Behind on Car Payments

According to Fitch Ratings, the percentage of subprime auto borrowers who were at least 60 days past due on their auto loans rose to 6.11% in September, the highest since 1994. Millions of subprime car owners are struggling to afford their car payments as interest rates continue to make loans more expensive. These rising delinquency rates may be indicating economic distress, specifically regarding the health of consumer spending.

Margaret Rowe, senior director with the asset-backed securities group at Fitch said, “The subprime borrower is getting squeezed. They can often be a first line of where we start to see the negative effects of macroeconomic headwinds.”

As delinquencies continue to grow, Cox Automotive estimates that repossessions will increase to the tune of 1.5 million vehicles seized this year, up from 1.2 million last year.

Delinquency rates are expected to persist as the Federal Reserve indicated its plans to keep rates higher for longer coupled with the fact that millions of Americans recently started repaying federal student loans again.