Consumers are struggling across the board, but a specific age range is quickly falling behind on their payments.
- Average prices for both new and used cars remain high, and the level of auto loan debt has risen by hundreds of billions of dollars as a result.
- As interest rates continue to climb, consumers with car notes are struggling to pay, with Gen Z and millennial borrowers accounting for nearly $20 billion in delinquent auto loan payments.
- Insurance premiums and the cost of service and repairs are also on the rise, adding further expense to car ownership and spurring young consumers to think outside the box for their transportation needs.
It's a well-known fact that buying a car isn't exactly easy right now. Week after week, news of material shortages, plant shutdowns, and fluctuating prices inundate consumers, as experts say "I'd wait if I were you." For the most part, this is and has been sage advice, but not everyone was able to weather a three-year-long industry storm.
Though a small subset of car shoppers managed to secure low-price, low-interest deals at the onset of 2020, the majority of car purchases over the last three years have been above sticker price with high-interest rates adding insult to injury.
- This is what happens if you don't pay your car note consistently.
In fact, 43% of Generation Z consumers said they had bought or leased their current vehicle since 2020, according to an analysis of the Federal Reserve's Quarterly Report by Jerry. And while dealerships have markedly profited from this group of buyers, the banks that financed these deals are now dealing with the consequences.
Specifically, analysis of Federal Reserve data from 2022 showed that drivers ages 18-39 accounted for nearly $20 billion in delinquent auto loans over 90 days past due. This concerning trend falls in line with the total outstanding debt held by people under 30, with a 37% rise since the pandemic started and a $1.27 trillion deficit at the end of 2022.
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