Fact Checked

Under-30 borrowers are struggling to pay their auto loans, New York Fed says

Written by: Paris Ward
• •2 min read
Stressed-out man trying to pay bills over the phoneImage: Stressed-out man trying to pay bills over the phone
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Recent data show that more than 7 million Americans were seriously behind on their auto loan payments at the end of 2018 — with borrowers under age 30 among those struggling the most.

The data comes from the Federal Reserve Bank of New York’s latest quarterly report looking at household debt and credit trends in the U.S.

The New York Fed explains in a related blog post that the number of Americans at least 90 days delinquent on auto loans has grown a lot overall — by more than a million — since the end of 2010. The Fed says that’s in part because auto lending has generally been on the rise for years, but also because younger and sub-prime borrowers are defaulting more.

Want to know more?

What’s the background?

The number of auto loans has risen steadily since 2010, according to the New York Fed’s data. Though most of that growth in 2018 came from borrowers with good credit, the rate of people falling at least 90 days behind on their monthly auto payments rose to 2.4% in the last quarter of 2018 — nearly double the post-recession low of 1.5% seen in 2012.

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The New York Fed’s Joelle Scally explained that overall performance of auto loans was “slowly worsening” due to “growing delinquencies” among both subprime and younger consumers. Delinquencies by borrowers under 30 worsened particularly steeply between 2014 and 2016.

There’s some indication that this may be related in part to the types of auto loans these consumers are getting. The New York Fed’s data show that 6.5% of car loans that were issued by auto finance lenders were in default at the end of 2018 compared to 0.7% of auto loans that were issued by credit unions.

Why does this matter?

While economists don’t take the New York Fed’s latest data on auto loan defaults as an alarm about the economy at large, they do see it as an indication that many younger and sub-prime consumers are struggling to make ends meet in spite of a strong labor market.

What can you do?

If you’re a younger borrower or have a credit history that needs work, and you’re in the market for an auto loan, one of the best first steps you can take is to understand how car loans work.

If you choose the right loan, you may be able to save money, get a car that works for you and keep growing a healthy credit profile. To learn even more about auto loans and find worksheets to help you analyze the kind of loan you need, you can check out the Consumer Financial Protection Bureau’s info page on auto loans.

About the author: Paris Ward is a content strategist at Credit Karma, providing readers with the latest news that will aid their financial progress. She has more than a decade of experience as a writer and editor and holds a bachelor’s… Read more.