DOWNHILL FAST: Americans Can't Afford Car Loans, 1.5 Million Cars To Be Repossessed In 2023

Hello and welcome back. Thank you so much for being here. If you're new, I hope that you consider joining me on YouTube and on Rumble. Like this video so more people can see it and check out my newsletter available on Substack. The number of Americans who are facing vehicle repossession is increasing at a record pace. A vehicle is a must virtually anywhere in the United States. It's really not seen as a form of luxury but a necessity. Many states don't even have public transportation that covers all areas and all neighborhoods of its cities. But the latest data suggests that an increasing number of those with car loans are getting more and more behind on their monthly payments. Car loan delinquencies have been rising for several consecutive quarters and we have yet to see October data. Student loan payments resumed on October the 1st, as you know. So if this is how bad things were getting prior to the extra $400 or more bill every single month, then imagine what October reports will show. As the result of the surge in car loan past due accounts and delinquencies, banks, credit unions, and independent lenders started to tighten underwriting standards on new and used vehicle loans because they want to minimize losses due to charge-offs. And this is according to TransUnion S&P Global Mobility Auto Credit Insight report. The average car loan interest rate currently is 9%. Based on the most recent October Experian report, your average interest rate for a used car is now 11.38% and 6.63% for a new car. Here's a breakdown from the report. It shows an average interest rate for each credit score range. Interest is lower for new cars and higher for used cars and it ranges anywhere between 5% for those with an excellent credit score and goes up all the way to 21% for those with a score between 300 and 500. According to Bankrate, the average car payment is now $729 per month for a new car and $528 for a used car. Nearly 40% of all vehicles financed are new cars with an average cost of car insurance being about $170 per month. What's really shocking is if you remember, just a couple of days ago I walked you through the latest September retail sales report and it showed that American consumers keep spending as if there were absolutely no financial distress in their economy. Of course, they spend their actual cash, their savings, as well as the money that they don't have, the money that they borrow using their credit cards. But you would think that if someone is falling behind on their car payments, then the reports would show a change in consumer behavior, that the reports would show a change in spending habits, but we did not see that in those official reports. There are two reasons for the increase in auto loan delinquencies. The reasons are higher rates, of course, and higher car prices. That increase in vehicle prices is the result of multiple reasons. Of course, it started back in 2022 as the result of global supply chain issues. It then continued due to a chip shortage, which isn't such a big deal anymore for vehicle manufacturers. But the biggest issue these days is the rise in all input costs. So production in general has become more expensive due to higher energy costs, higher material costs, higher labor costs, you name it. According to Bloomberg, the percent of subprime auto borrowers at least 60 days past due, so two months past due, on their loans rose to 6.11% in September, the highest in data going back to 1994. And this is according to Fitch Ratings. The percent of borrowers who are at least 60 days, that's two months past due, on their car loans is at the highest level in three decades. It's actually about to inch even higher than the 1994 level or the 2008 numbers. So the next step is an increase in repossessions. There are estimates that 1.5 million vehicles are likely going to be seized this year. What is the latest forecast for the auto industry? Will new car prices drop anytime soon? Edmunds believes that sales prices have stabilized and have been heading slightly downward since January of this year, with the average discount increasing from just $15 back in January to $714 in July. Edmunds appears to believe that the current level of supply actually matches demand. And so that means that the car market effectively reached that point of an equilibrium. And of course, this is according to Edmunds research and their conclusions. And so that in turn means that there's no motivation for automakers or dealers to reduce prices. Yes, it's not ideal for those who need a new car or a new but pre-owned vehicle, but the days of high inventory and deep discounts or a high probability of car prices dropping isn't really anywhere in the foreseeable future. S&P Global says don't expect used cars to drop in price because the used vehicle market is expected to remain tight as the low level of new car sales starting in 2020 means fewer recent model year used cars available now. They also added going forward, affordability remains critical to consumers, particularly those with credit scores below prime. With that information and the Federal Reserve likely planning to increase interest rates one more time before the end of this year, taking out a car loan and making those monthly payments on time will become less accessible to many consumers. Past due and completely delinquent car loans aren't the only concern for lenders. As delinquency rates on credit cards and personal unsecured lines of credit continue to rise, banks will likely tighten their lending standards, which will make it even harder to get that financing. I realize that this is bad news, but in my opinion, it is important to understand what's going on because with weak consumers, an economy cannot be strong despite what we keep hearing from people in a position of power. Those of you who are interested in getting some help with starting a business, legally forming it in the United States, and handling your taxes and personal finances, there's now a second channel where I will be uploading content on these topics. If you are interested, you are welcome to follow the link below and join the channel. Thank you so much for joining me today. Like, subscribe, and I'd also like to remind you to follow me on Rumble. All of my social media links are listed below. I'll see you in my new one soon. Bye for now.