Are German cars only for the affluent? Why are repossession rates surging in America? Let’s delve into the growing private debt crisis that is impacting car ownership in the US.
According to recent data, car repossessions spiked 23% in the first half of 2024, with projections indicating that 1.6 million Americans could lose their vehicles to the bank by the end of the year. This trend signals a concerning increase from previous years, with 1.5 million cars repossessed in 2023 and 1.1 million in 2021.
So, what’s driving this surge in repossessions? The rising cost of car ownership is a significant factor. Factors like inflation, interest rate hikes, and supply chain disruptions have contributed to skyrocketing car prices. The average list price of a new car in the US is now $49,096, far exceeding what many Americans can comfortably afford. As a result, new car inventory has increased by 36% this year, yet cars are sitting on dealership lots for an average of 65 days, a 41% annual increase.
Dealerships are struggling to entice buyers, even with minimal down payments and extended payment plans. The average monthly payment for a new car is about $735, while used models average around $523 per month. However, many Americans lack financial literacy and may not fully understand the true costs of car ownership.
The average American now borrows around $40,634 for new vehicles and $26,073 for used vehicles, accounting for a significant portion of total consumer debt. With households already burdened by debt, the threat of repossession looms large for those living paycheck-to-paycheck.
Experts predict that car repossessions will continue to rise, with projections indicating 1.7 million repossessions by 2025. As of Q1 2024, US household debt totaled $1.77 trillion, with auto debt accounting for $1.62 trillion. Major banks like Bank of America, Citigroup, and Goldman Sachs have reported substantial losses due to unrecoverable debt.
Furthermore, the push towards electric vehicles (EVs) adds another layer of complexity to the car ownership crisis. As governments advocate for greener transportation options, tariffs on cheaper EV alternatives from China restrict access for budget-conscious consumers. This, coupled with the looming threat of the Great Reset agenda aiming to eliminate private car ownership, paints a challenging future for American car owners.
At Extreme Investor Network, we keep a close eye on economic trends impacting investors and consumers alike. Stay informed with our latest insights and analysis on the evolving landscape of private debt and car ownership in America.