Aggressive Borrowing
The first chart in this graphic shows the growth in outstanding car loans between Q2 2020 (start of the pandemic) to Q4 2022 (latest available).
We can see that Americans under the age of 40 have grown their vehicle-related debt the most. It’s natural for Gen Z (ages 11-26) to have higher growth figures because many of them are buying their first car, but 31% is quite high relatively speaking.
Part of this can be attributed to today’s inflationary environment, which has pushed used car prices to new highs. Supply chain issues have also resulted in over 30% of new cars being sold above MSRP.
Because of these rising prices, the Fed reports that the average auto loan is now $24,000, up 41% from 2019’s value of $17,000.
Spiking Delinquencies
Interest rates on auto loans are typically fixed, meaning many young Americans were able to take advantage of the low rates seen during the pandemic.
Despite this, one in five Gen Zs say that their car payments account for over 20% of their after-tax income.
Shown in the second chart of this infographic, the amount of auto debt transitioning into serious delinquency is much higher for Gen Z and Millennials. Throughout 2022, these generations saw $20 billion in auto debt fall 90+ days behind.
The outlook for these struggling borrowers is bleak. First there’s inflation, which has pushed up the prices of most consumer goods. This eats into their ability to make car payments.
Second is rising interest rates, which make credit card debt—another pain point for young borrowers—even more costly. Finally, there’s student loans, which are expected to resume in summer 2023. Payments on student debt have been suspended since the beginning of the COVID-19 pandemic.
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30 year fixed mortgages needed !!
When autos cost More than houses used to cost the SHHHT needs to STOP !!!! They are Not a
ROCKET SHIP for NASA !!!!
They are Not worth ANY more than in 1970’s and Really LESS !!!! Ripping Americans OFF !!!!
YOUNG will have to buy USED !!!! Get USED to it !!!
A little bit of money management skills, which should have been taught in high school, would have been well applied in determining whether you can afford a brand new car or need to purchase something used.
When counting on a government bailout for their student loans the expectation is no doubt their car loan should be next
Young people nowadays are so irresponsible!
1:35…………They can’t teach anything like that in school. They need that time for sex classes and how to be as good tranny and what a wonderful, normal thing it is to be gay. Oh, that’s right………..that’s mostly taught in K-3rd. grade.
Unless you make $$ 100,000 or more a year you Not going to be driving a NEW vehicle !!!!! ANYMORE
I am a millionaire and I don’t (and won’t) own a “new” car. Buying new cars is just another stupid irresponsible thing that people do because they think it will make them better somehow. So many people spend too much on cars, houses, and toys. Instead, they should save money, live frugally, and enjoy the true freedom that can only come by living well within your means. If you have enough for food, clothing and shelter, the rest is icing on the cake. When you can look ahead and see financial freedom, then you can really be happy. Work hard, learn math, crunch the numbers, stop living for the momentary pleasures. Grow up, be smart, and you will be so much happier.
And bourbon