As the economy struggles and inflation continues to rise, many Americans are facing the difficult reality of auto repossessions. The pandemic caused a surge in used car prices, forcing buyers to take out larger loans for their vehicles. These monthly payments were manageable in an era of stimulus checks, a tight labor market, and soaring stocks, but as inflation takes its toll on budgets and the job market cools, more Americans are falling behind on their car payments than during the financial crisis of 2009.

In December 2022, the percentage of subprime auto borrowers who were at least 60 days late on their bills rose to 5.67%, up from a seven-year low of 2.58% in April 2021, according to Fitch Ratings. This compares to 5.04% in January 2009, the peak during the Great Recession. This is an ominous sign for the US economy and it has been felt acutely in Texas, a state that has long had a strong relationship with cars and car culture.

This trend is being exacerbated by higher interest rates, making it even more difficult to make the monthly payments. The average new auto loan rate was 8.02% in December, up from 5.15% a year earlier, according to Cox Automotive. The rate can be much higher for subprime borrowers, making it nearly impossible for them to keep up with the payments.

For those who do fall behind, the repossession can have a significant impact on their credit score for as long as it stays on the credit report, usually about seven years, according to Experian. This can make it difficult for them to secure loans in the future, leading to a cycle of financial struggles.

In Texas, Josef Fields fell behind on his car payments and now faces a hit to his credit score. With his monthly bill at $556 for his 2021 Subaru WRX, the 25-year-old was having a hard time figuring out which costs to prioritize. He tried to apply for a hardship program through his bank, but it was too late. He woke up to an empty driveway a week before Christmas. Now, the repossession and tow fee will cost him $1,600 — about the total sum he owes in back payments as well. He’s trying to save up for another car but it will likely take a while. One positive is that he can walk to his job at the local post office. But whenever he needs to go to the grocery store, he has to ask a friend or take an Uber, which adds even more costs. In San Antonio, one individuals car payments fell behind on a Honda Fit & now she is hiding it, to prevent it from being repossessed.

The rise in auto delinquencies is a reflection of the broader struggles faced by many Americans as inflation continues to rise. It is a difficult reality for those who have lost their cars and it highlights the need for more support and resources for those who are struggling to make ends meet.

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