Average Americans Are Struggling To Pay For Their Cars Following Delinquencies, Price Increases

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Will Kessler Contributor
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Heightened rates of auto loan delinquency and increased costs reveal that Americans are struggling to afford their cars, according to The Wall Street Journal.

Both prime and subprime auto loans have increased in 60-plus-day delinquencies, with prime reaching 0.49% in June compared to 0.41% a year prior and subprime reaching 5.37% compared to 4.89% during the same time frame, according to S&P Global. Only one new car model is listed as selling for under $20,000 in 2023, as opposed to a dozen five years ago, according to the WSJ. (RELATED: Mortgage Rates Reach A 20-Year High Following Interest Rate Hikes)

The average costs for used cars are high, as well, with the average used vehicle listed at around $27,000, which is up 30% from pre-COVID-19 pandemic levels, according to the WSJ.

The average for new car loan payments is over $750 per month with the average interest rate being 9.5%, according to the WSJ. To pay off a new car at current prices would require the average American to pay 42 weeks of their income, which is up from 33 weeks before the COVID-19 pandemic.

Interest rates are facing upward pressure following the 11th rate hike by the Federal Reserve since March 2022, bringing the federal funds rate to a range of 5.25% and 5.50%, the highest since January 2001.

The Consumer Price Index increased 3.2% for prices on an annual basis in July, down from a high of 9.1% in June 2022 but up from 3.0% in June, indicating upward inflationary pressure and a rise in prices in general.

The United Auto Workers (UAW) union and the Big Three automakers, Ford, General Motors and Stellantis, are currently in negotiations over new contracts for automotive workers demanding higher wages and greater benefits, with the current contract expiring on Sept. 14. The UAW is set to vote on the authorization of a strike this week, with the estimated economic damage of a strike being $5.6 billion after just ten days.

Gas prices have also been on the rise. The current average for regular gas is currently $3.865 per gallon compared to $3.587 per gallon last month, according to data from AAA.

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