The rate of car repossessions in the United States is on the rise and is expected to continue to do so in the coming years. In 2020, repossession rates were at the lowest they had been for six years before the pandemic. However, in 2022, repossession rates reached nearly pre-pandemic levels and in the case of low-income families, had exceeded their 2019 rates.
During the pandemic, lenders became more lenient and opted against repossessing vehicles at the same frequency as they normally would, also government initiatives such as student loan freezes, stimulus checks, unemployment benefits, and rental assistance kept US citizens afloat and able to pay for their vehicle’s loans.
Currently, many families are struggling to keep up with their vehicle payments and the rate of repossessions is rapidly increasing. Let’s explore the four main reasons for the increase in families’ cars being repossessed
1. Pandemic Vehicle Purchases
2. Increase in Vehicle Prices
3. Increase in Vehicle Maintenance Fees
4. Inflation
Pandemic Vehicle Purchases
Many people experienced an increase in cash flow during the pandemic through government support in the form of rental assistance, unemployment compensation, stimulus checks, etc. Additionally, with most people working from home, many families were able to save on expenses related to commuting to work and school, including transportation, meals, etc.
During this time, many people used their additional income to purchase newer, more expensive vehicles. Now that life has returned to normal, they find themselves incapable of maintaining their auto loan payments.
Increase in Vehicle Prices
From January 2021 to January 2022, auto prices increased by 36.9%, and in June 2022, the used car prices were still 12% higher than the previous year. The drastic increase in prices and the decrease in the supply of used cars under $10,000, has resulted in one in six car buyers being faced with loan payments of up to $1000 a month. More and more people are finding it exceedingly difficult to afford auto loans increasing auto delinquencies and repossessions.
Increase in Vehicle Maintenance Fees
The increase in vehicle maintenance fees, including gas, insurance, and repairs has increased drastically due to inflation, pandemic-related shortages, and labor shortages. According to the U.S. Bureau of Labor Statistics, gas prices increased by 59.9% in 2022, and vehicle maintenance increased by 15%. The increase in the cost to maintain a vehicle is causing the repossession of many family vehicles.
Inflation
The increase in housing costs and critical consumer goods, such as gasoline and groceries, has left families surviving on much tighter budgets than in previous years. Many families find it difficult to keep up with the increase in car payments and maintenance fees. Given the rapid increase in the cost of living in the US, families who could have easily afforded their auto payments two years ago are currently facing the threat of repossession.
If you are already filling the pinch of the recession and you need to file bankruptcy please schedule an appointment with us here at Hishaw Law LLC. We are experienced in handling Chapter 7 and Chapter 13 matters. Please complete the online bankruptcy form prior to your consultation. Please reachout to us at 1.307.228.0407 to schedule a consultation.
