You are not alone if you are finding it difficult to make payments on your auto loan according to recent info from the New York Federal Reserve. They said that auto loan delinquency has reached an 8 year high.

Auto loan delinquencies over 30 days totaled over $23.27 billion, which is the highest it has been since the $23.46 billion reached in Q3 2008. The extremely delinquent portion of a car loan, which is a minimum of 90 days past due totaled $8.24 billion.

Even though those numbers might look horrific, there is only a 3.8% delinquency level compared to the $1.16 trillion for outstanding auto loans in total. The increase in delinquency rates could be an artifact of the total improvement in the auto industry. In Q4 of 2016, $142 billion in auto loans were generated according to a Fed report, which made 2016 the highest total number of auto loans since the Fed started keeping this data 18 years ago.

Is this somehow related to the housing crisis? There are some parallels, particularly the impact to the risk levels and delinquency rates. The New York Fed’s previous report brought up concerns regarding the increasing delinquency level among subprime credit seekers with comparatively low credit ratings, producing a rough parallel to the housing crisis. Similarly to housing, the extension of credit to high-risk borrowers might result in higher default levels making repossession more likely.

The serious delinquent auto loans increased from 3.6% to 3.8% as per Fed data throughout Q4, but from a wider perspective, these numbers are in line and don’t seem to be driven by or influenced by raising subprime loans. Fed data employs a credit rating range to reduce the total auto loan originations, which reveals the dollar value of originations with credit ratings under 620 continues to decline gradually during the last 2 quarters. These originations dropped from around $30 billion in Q2 of 2016 to around $25 billion by Q4. Find out your credit score and go over your credit report for free in just a few minutes, go to Credit Manager , or CreditKarma.com.

Even if there were indications that show auto loans are in a bubble similar to the housing crisis bubble, the comparatively small portion of the auto loan sector isn’t big enough to result in a snowball effect that caused the Great Recession. Take a look at the overall household debt instead, which also happens to be getting close to the peak value in 2008.

The total debt from all household categories like student loans, credit cards, mortgages, home equity loans and car loans was 12.58 trillion, which is nearing the $12.68 trillion peak value reached in 2008. Auto loans only accounted for 9% of that total debt and have been fairly consistent over the recent years. Student loan debt might represent the bigger potential bubble, which is currently at $1.31 trillion with an 11.2% rate of serious delinquency, but the actual delinquency rate might be double that number due to the number of loans in grace periods, deferment or forbearance.

In all likelihood, you don’t care if other people have delinquent payments for auto loans or if the overall auto debt is a threat to the U.S. economy; you are probably more interested in getting rid of your own auto loan debt so that your household economy isn’t negatively impacted. Your credit rating will be impacted by delinquent auto loan payments, making getting out of debt even more difficult.

The bad news is that there is no simple solution. Getting rid of an auto loan debt, similarly to any other debt requires eliminating unnecessary expenses, budgeting and getting more income any way you can. If it is still difficult to make ends meet, you might have to think about giving up your car as repossession is very likely.

 

 

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