The Federal Reserve Bank of New York has warned of a “substantial and growing number” of auto loan delinquencies in what could be a sign of trouble for the broader U.S. economy.
The bank said that although overall delinquency rates remain below the peak levels of 2010, there were more than 7 million Americans who were at least 90 days behind in their auto loan payments at the end of last year — more than a million more than eight years ago.
The total amount of auto-loan debt in the U.S. is now $1.3 trillion, representing a $584 billion increase over the level in 2010.
“The substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labor market,” the New York Fed said in a blog post.
Analysts said the increase in delinquencies may reflect, in part, rising vehicle prices and auto loans, with some American biting off more debt than they can chew.
According to Lending Tree, the average amount borrowed for a new-car purchase is now $29,921.27, an increase of $5,000 over the average from 10 years ago, as consumers have shifted from lower-priced sedans to more expensive SUVs and trucks. The average monthly payment is now $530 per month for new vehicles and $381 per month for used vehicles.
Some people “may have bought too much of a vehicle,” Jeff Schuster, a senior vice president at the forecasting firm LMC Automotive, told The Associated Press.
But the AP said economists and auto industry analysts “aren’t sounding an alarm yet” since the number of delinquencies “is higher largely because there are far more auto loans out there as sales grew since the financial crisis, peaking at 17.5 million in 2016.”
“I think it’s a little too soon to say that the sky is falling, but it’s time to look up and double check to make sure nothing is about to hit you on the head,” said Charlie Chesbrough, senior economist for Cox Automotive.