A subprime borrower is someone who has a credit score that is under 670. These buyers often still qualify for car loans.
However, recent reports show that the number of defaults on these loans has been increasing in the last few years. When looking at those who are at least 60 days behind on their car payments, for instance, the total percentage has doubled when compared to just 2021. Researchers note that this means it is worse than the rates seen during the dot-com bust, the Great Recession and the COVID pandemic—the last three major recessions in the United States.
What does this mean for the future?
The recession in 2008 and 2009 certainly saw a high level of car repossessions, which has only been topped by the rates seen today. The average price of a new car—now over $50,000—is also significantly higher today than it was in 2008, which could be a contributing factor.
But one big question is what this is going to mean for all sorts of debt in the future. Rising car loan delinquency is seen as both a concern and a warning by economists. They note that cars are so fundamental to life in America that people will often miss many other payments—mortgages, credit cards, medical bills and more—before they will miss a car payment. When the rate of car loan defaults increases, it signifies significant economic issues in the country.
If your business is having trouble collecting, this trend could be part of the reason, especially if you deal with car loans. It is important to understand exactly what legal options you have.
