Generally, American households are in a healthy financial position. Though unemployment has risen, it has been at fairly low levels. Consumer spending has remained resilient despite low sentiment, and many families have witnessed significant stock market gains and a substantial home equity cushion. Still, there are signs of economic trouble, as evidenced by the rising number of consumer credit delinquencies.
VantageScore Chief Strategy Officer and Chief Economist Dr. Rikard Bandebo joined Bloomberg’s Odd Lots podcast to explain how surging prices, rising interest rates, and insurance costs have created a unique ‘squeeze’ in which auto loan delinquencies have surged to their highest level in history.
“Auto loans have transitioned this year into the riskiest credit product out there,” said Dr. Bandebo. “The average cost of a car has gone up an incredible amount, and the average loan value for auto loans has increased more than any other loan value. The fact that the average auto loan has grown more than the average mortgage has over a 15-year period is telling.”
Dr. Bandebo also discusses what delinquency trends mean for broader consumer health and whether this phenomenon signals something broader about consumer stress, noting “middle-income delinquencies have come down, and lower-income delinquencies have stayed persistently high. We will probably see more households struggling to make ends meet next year than we did this year.”
Listen to the full podcast episode here or watch the podcast interview here.
