There is more money owned on car loans now at – $1200 billion – than ever before. The lenders’ assistance in the form of delayed payments won’t last forever. According to TransUnion, “Serious” delinquencies are not a threat. But they warn there are signs there could be trouble going forward in the world of auto loans.
Corona Virus-Related Economic Turndown
There is a number of auto loans that are more than 30 days past due has increased. As a result, there are plenty of anecdotal stories about people not being able to pay because of the related COVID-19 economic downturn.
TransUnion’s latest monthly snapshot report looked at the financial industry in August. It was citing the number of accounts that are 30 days past due moving up a bit, to 3.1 percent, in August comparison to 3.0 percent in July.
Forebearance Program for Auto Loans
It was stated TransUnion isn’t quite sure where things are headed. That is because a fair number of people with auto loans are in some sort of forbearance program. That means the lender approves of temporarily pausing repayments on a loan. Yet it doesn’t reduce the amount owed. Given the job losses and other economic hardships that COVID-19 has brought to many people. Therefore, the percentage of auto accounts in forbearance rose to 6.2 percent in July, then dropped to 4.3 percent in August.
Changes Compared to Pre-COVID Levels
Below we can better see the change in comparison to pre-COVID levels. Only 0.5 percent of automotive accounts were in forbearance in August 2019, according to Automotive News. Although, at that time, 3.9 percent of all auto accounts were at least 30 days past due. It would seem that Corona Virus-related forbearance is helpful to one area of the loan-holding population.
People Struggle to Balance Paying their Auto Loans with Other Bills
MarketWatch spoke to a number of people who are struggling to balance paying their car loans with other bills. The publication cites that the federal CARES Act, which offered some forbearance for home loans, did not cover auto loans in any way. And people kept on borrowing to get some wheels, with $21.6 billion of subprime auto bonds issued in 2020, according to Finsight and cited by MarketWatch. That’s pretty much average, even though the economy has been anything but normal this year.