Increase In New Car Repossessions May Be Bad News For Us All

Rise in foreclosures could be a sign of impending recession, analysts say

Along Sam D. Smith

Economists are looking for clear early warning signs of a collapse as fears of a global recession rise to an all-time high. More and more US consumers are falling behind on their car payments, leading to rising repayment rates. Despite many predicting the pandemic would reduce demand for new cars, consumers—some armed with stimulus checks and extra vacation money—were ready to rush the deal. Additionally, in the early days of the pandemic, lenders were more accommodating of late payments. But with rising unemployment and inflation wiping out many household savings, the trend appears to be to ditch the car. Read: More and more Americans are struggling to pay their car loans

Rising costs are not only putting pressure on household budgets in terms of essentials, but prices for gas, car insurance and repairs are all skyrocketing. NBC News reports that the average monthly payment for a new car has increased by about 26% since 2019, with 1 in 6 buyers spending more than $1,000 a month on their vehicle. With a recession expected in 2023 and no end in sight for high interest rates, repo firms are already inundated with work. This is partly because many repo agencies closed in 2020, forcing workers to look for other jobs. But the influx of subprime borrowers will start in 2020, according to Jeremy Cross, president of International Recovery Systems in Pennsylvania. It seemed like a recipe for disaster, as people had a lot of cash to stay at home and were shopping like crazy because their credit scores were ballooning.

There's a bit of good news, though. Defaults are expected to rise, but analysts do not expect restitution rates to be as bad as they were seen in his 2008 and his 2009. Rather, it is likely to exceed pre-pandemic levels. In the third quarter of 2022, he had a 2.2% percentage of auto loans that were 30 days past due, compared to his 2.35% in 2019.