WSJ: More Auto Payments Are Late, Exposing Cracks in Consumer Credit

More Auto Payments Are Late, Exposing Cracks in Consumer Credit
The U.S. economy is on a steady footing and the unemployment rate is superlow. Yet a rising number of Americans are falling behind on their car payments.
The past few years have been unusually good for consumers, who stowed away extra money during the pandemic, but sky-high inflation is eating away at those gains. Car prices, in particular, jumped because of a shortage of vehicles. Many borrowers took out large loans to buy them, leaving little breathing room to keep up with payments if they hit a rough patch.
Nearly a fifth of banks said they eased credit standards for auto-loan applicants in the first half of 2021, according to a Federal Reserve survey of senior loan officers, while more than a 10th did in the second half. Many said they lowered minimum credit score requirements that year.
Consumer lawyers said that when cars were in short supply during that time, some dealers were able to sell vehicles that were in worse condition, increasing the risk that they would break down or require major repairs. A key reason borrowers stop paying is that the car stops working.