A record 7 million Americans are 90 days or more behind on their auto loan payments, the Federal Reserve Bank of New York reported Tuesday, even more than during the wake of the financial crisis.
As The Washington Post reports, economists warn that this is a red flag because, despite the strong economy and low unemployment rate, many people are struggling to pay their bills.
“The substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labor market,” economists at the New York Fed wrote in a blog post.
However, the number of auto loans surged in the past several years as car sales skyrocketed, hitting a record high in 2016 of 17.5 million vehicles sold in the United States. Many borrowers have strong credit scores and repay their loans on time, but defaults have been high among “subprime” borrowers with credit scores under 620 on an 800-point scale.
The share of auto loan borrowers who were three months behind on their payments peaked at 5.3% in late 2010. The share is lower now—4.5%—because the total number of borrowers has risen. Still, economists are concerned because the number of people impacted is far greater now and the rate has been climbing steadily since 2016. Read the full story.