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Record number car loans delinquent, millennials lead the way

As we have been reporting on, Americans are in more debt than ever and the number of car loans that are 90 days+ delinquent is at a record high. There are more people who are seriously delinquent on their auto loans as 2018 ended than ever before, with millennials in the worst shape. The situation is getting worse too, as Americans are in record debt on about everything, and to make matters worse, they are in so called bad debt, meaning credit cards and auto loans among other types.

When it comes to auto loans, over 7 million borrowers were more than 90 days late on their payments at the end of 2018. This is a record high, and the figure is even worse today than it was during the depths of the great recession of 2007-2010, when unemployment was at 10% (as opposed to under 4% today).

Millennials (age 18 to 29) are leading the way when it comes to being late on car payments. Their rate of 90 day delinquent loans is about 50% higher than the next closest age group, which is people who range in age from 30 to 39.

There are conflicting thoughts as to why so many Americans are behind on their auto loans. However maybe the number one reason is that people are borrowing more and more money to buy a car. After all, the amount being borrowed for a new car is now about 31K according to Experian.

Anyone buying a used car is also not being very sensible. Consumers are now borrowing 19K for a used car. As typical, Americans are overextending themselves and trying to live beyond their means…as if someone can’t afford a 31K car, there are cheaper models they can buy.

If someone can’t afford an expensive car, then why are they borrowing over 30,000? It is insane. They probably do it to try to show off or put out a fake image…. show some “fancy” car they are driving but can’t afford. The American way…. As after all there are much less expensive models on the market…and how about saving for a significant downpayment?

The average monthly payment for a new car is over $500 as 2018 closed out This is a stretch for most households, and as the data shows more people can’t afford it so they are delinquent on their loans. In fact, 7 million plus borrowers are behind more than 90 days as noted.

Over extending oneself, and borrowing money, for a car is a horrible use of money as well as a car is a depreciating asset. It loses value over time…in fact the moment a car is driven off the lot it goes down in value by thousands of dollars. Borrowing money for deprecating assets is always a poor use of money. This is exactly what you should not do to build wealth or financial freedom.

The concept of borrowing money for a depreciating asset such as a car is even worse for millennials as well, as saving, investing, etc. when young is the best time to do it as your investment has time to grow. So instead of a younger person borrowing 20-30K for a car, they would be much better served buying a less expensive car that they can easily afford and invest the balance of the money into stocks, bonds, a house, or some other type of “appreciating asset” that has time to grow.

Our blog has countless tips on saving, investing, building wealth and living within means. Always feel free to search it


Jon McNamara is the CEO of needhelppayingbills.com, a company that he started in 2008 and that specializes in helping low income families as well as those who are in a financial hardship. He also found NHPB LLC, a company committed to helping the less fortunate. Jon and his team also provide free financial advice to help people learn about as well as manage their money. Every piece of content on this website has been reviewed by him before publishing and many of the articles he has personally written. Jon is the leading author for needhelppayingbils.

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