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There are more reasons to be pessimistic about the state of the auto industry than most people care to admit. With chip shortages and, well, everything shortages across the board, there's another issue lingering in the shadows that might be even harder to solve than the microchip shortage. Currently, Americans have more auto debt in their name than almost any other expense, to the tune of over $1 trillion.
The report came from Consumer Reports last week, and the prognosis was anything but optimistic. In a car market where a loan with less than 10% interest rates is considered broadly acceptable, some borrowers were paying as much as a staggering 25% APR on their car loans.
Consumer reports concluded that a disproportionate number of people in less than ideal car loan situations were paying as much as 10% of their income on auto loans. This is money people could be using to pay rent, buy food, or order tasty car mods for the new Jetta. It's money that's safe to say, is being used unwisely.
Worryingly, many of the same qualities that buyers are now accepting as status quo in auto loans also transpired during the sub-prime mortgage crisis of 15 years ago. With just 4% of total loans dispersed being verified to ensure the borrower can effectively pay it back.
The report confirmed that at least $1.37 trillion worth of debt is accrued in hundreds of thousands of car loans, more than the GDP of some highly developed countries. With so many Americans on the ragged edge of default off the back of car payments, rent hikes, outrageous student loan bills, and other expenses, it's putting a tremendous strain on working-class Americans.
It's a phenomenon that threatens to snowball into another recession that so many worked so hard to dig out of, thanks to an out-of-control public health crisis. Only time will tell how long Americans can hold on to their financed cars or see a mass impounding crisis the likes of which we've never seen.
Consumer reports concluded that a disproportionate number of people in less than ideal car loan situations were paying as much as 10% of their income on auto loans. This is money people could be using to pay rent, buy food, or order tasty car mods for the new Jetta. It's money that's safe to say, is being used unwisely.
Worryingly, many of the same qualities that buyers are now accepting as status quo in auto loans also transpired during the sub-prime mortgage crisis of 15 years ago. With just 4% of total loans dispersed being verified to ensure the borrower can effectively pay it back.
The report confirmed that at least $1.37 trillion worth of debt is accrued in hundreds of thousands of car loans, more than the GDP of some highly developed countries. With so many Americans on the ragged edge of default off the back of car payments, rent hikes, outrageous student loan bills, and other expenses, it's putting a tremendous strain on working-class Americans.
It's a phenomenon that threatens to snowball into another recession that so many worked so hard to dig out of, thanks to an out-of-control public health crisis. Only time will tell how long Americans can hold on to their financed cars or see a mass impounding crisis the likes of which we've never seen.
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