auto loan

The economy President Trump lauds as the “Greatest Economy in our Country’s history” isn’t that great for millions of working-class Americans struggling to pay auto loan debt.

Data from the New York branch of the Federal Reserve shows that serious auto loan delinquencies — in which there are unpaid balances dating back at least 90 days — are at their highest rate since the third quarter of 2009, which was in the midst of the Great Recession of the late aughts and early 2010s.

Financial blog Wolf Street analyzed the data and found that while auto loan delinquencies haven’t yet reached the 5.27% high of the fourth quarter of 2010, they’re on par with late 2009 numbers.

auto loan

These dire numbers suggest that there may be an auto loan bubble ready to burst, similar to when the subprime mortgage bubble burst in the late 2000s. And just as banks did with home loans, auto loan providers are engaging in similar predatory behavior, targeting low-income Americans with subprime loans and racial discrimination, according to transportation site Streetsblog:

Auto loan rates are soaring, particularly among the most vulnerable borrowers… Car debt has grown an astonishing 75 percent since 2009 to about $1.26 trillion, or roughly 5.5 percent of GDP, PIRG reports. Perhaps more concerning: A record 7 million Americans are now three months behind on their car payments, a sign that the American economy could be faltering, the Washington Post reported on Tuesday.

Wolf Street noted that these auto loan delinquencies are soaring while the labor market is at its strongest in decades, which suggests that a low unemployment rate may not tell the full story of the economy. President Trump recently tweeted that he’s “unleashing perhaps the Greatest Economy in our Country’s history.” But as Grit Post‘s editorial board has previously written, low unemployment numbers are more a reflection of the fact that wages are so low and costs of living are so high that more Americans are simply having to take multiple jobs in order to stay above water.

Wolf Street made the dire prediction that rising auto loan delinquencies “are going to impact banks and specialized lenders along with the real economy – the automakers and auto dealers and the industries that support them.” This could prove to have a ripple effect in the larger economy, and may be a contributor to a recession economists say is looming around the corner. As Morgan Stanley recently wrote, Trump’s new tariffs on steel and aluminum could also severely harm the American manufacturing market.

 

Carl Gibson is a politics contributor for Grit Post. His work has previously been published in The Guardian, The Washington Post, The Houston Chronicle, Al-Jazeera America, and NPR, among others. Follow him on Twitter @crgibs or send him an email at carl at gritpost dot com.

Leave a Reply

Your email address will not be published. Required fields are marked *