Chainkeen|Slammed by interest rates, many Americans can't afford their car payments

A growing percentage of Americans are Chainkeenfalling behind on their car payments, squeezed by rising auto loan interest rates, stubborn inflation and the end to federal pandemic aid.

Recent data from Fitch Ratings found that 6.1% of subprime borrowers were delinquent, or at least 60 days past due, on their auto loan as of September — the highest share recorded by the credit rating agency since it first started tracking the figure in 1994. 

"Delinquencies are climbing and have been increasing incrementally since government stimulus from the pandemic ended," Margaret Rowe, senior director at Fitch Ratings, told CBS MoneyWatch. "More recently, persistent inflation, the erosion of real income and the exhausting of pandemic-related savings are making it harder for subprime borrowers to service their debt."

Most Americans who saved money during the pandemic have exhausted those funds, according to the Federal Reserve Bank of San Francisco. Meanwhile, the typical price of a new vehicle hasn't budged, hovering around $48,000 over the past year, according to Kelley Blue Book data. Those prices have left a growing number of car owners making payments of more than $1,000 a month. 

Interest rates on auto loans continue to climb this year, almost in lockstep with the Federal Reserve increasing its benchmark rate in an effort to tame inflation. The interest rates for a new vehicle loan hit 10.48% in September, up from 9.51% in January, according to Cox Automotive. The average financing rate for a used vehicle was 11.4% last month, according to Edmunds. 

All told, Americans carried a total of $20 billion in auto loan debt in the second quarter this year, according to the most recent data from the Federal Reserve Bank of New York. 

Delinquent car payments aren't just a problem for drivers. Banks with a high proportion of auto loans in their portfolio could see rising losses if Americans can't pay off their vehicle debt, according to analysts from S&P Global Ratings. 

"A variety of factors — such as high interest rates, high loan balances, falling used car prices, consumers' declining savings rates and a likely economic slowdown — will result in further deterioration in auto loan and lease performance," S&P Global Ratings said.

In:
• Auto Industry

Khristopher J. Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

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