People’s eyes have been bigger than their wallets and defaults in the subprime auto loan market are soaring. From Eric Peters at ericpetersautos.com:
100 million Americans – up from 81.4 million back in 2010 – are making monthly car payments and those payments now average $737 on new cars and $520 on used ones. Unsurprisingly, a record-high percentage of those in hock are failing to make those payments. Most of those – 6.6 percent, according to Axios – are in the “subprime” credit category, meaning they have poor credit and so pay more interest than people with better credit.
But the take-home point is that there are lots of people who aren’t making their payments – which is as surprising as the fact that people in their 80s tend to die more commonly than people in their 20s – given those average payment numbers referenced.
$737 – per month! For a car. According to the Bureau of Labor Statistics, the average weekly pay in the fourth quarter of 2024 was $1,192. That’s not what’s actually taken home, either. After what’s taken off – for federal taxes and Social Security “contributions” – it is substantially less than that. Let’s say it’s about $1,000 in actual pay – and that’s likely optimistic given it would mean only about 20 percent taken off the top in various taxes. That would mean a $737 payment would eat up just about one week’s pay. A fourth of one’s monthly pay in other words. Not counting what a person pays for gas each week, which is probably at least another $200 per month. Then there’s food – and rent/mortgage/unrealized capital gains taxes (i.e., “property taxes”). Plus “health” insurance, too.
Of course, it’s not just those numbers.
