A growing cascade of financial pressures around owning a car are squeezing already strained consumers, including lenders who have limited borrowers ability to finance a car, rising insurance rates and car prices that remain well above pre-pandemic levels.
Following the recent turmoil in the banking industry, lenders have become increasingly cautious over who they will loan money to with the rejection rate for car loans rising to 9.1% in February, the highest since 2017, according to the Federal Reserve Bank of New York. For those able to get a loan, the average interest rate for a new car is up about 3 points over the past year to nearly 9%, according to data compiled by Cox Automotive shows.
The rising costs around owning a car are leading to a growing number of people falling behind on their car payments, and charities that assist people trying to buy a car say they are struggling more than ever to meet the growing demand as they face their own cost pressures. Given how crucial a car is for finding and keeping a job in most of the country, the dynamics in the car market could have even bigger implications for the economy.
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