If you’re struggling making your auto loan payments on time, you’re not alone. A new report from the Federal Reserve Bank of New York found that seven million adult Americans are 90 days or more behind on payments. That’s a record high.
This record high default rate is alarming, as it coincides with a record number of auto loans issued. The Fed report explained that in 2018, a record $584 billion in new auto loans and leases appeared on Americans’ credit reports. In 2017, $569 billion in auto loans and leases was reported. The authors behind the Fed report claim that this record high in defaults spells overall trouble for Americans and the economy. The reason? Cars are a vital part of our lives. Without cars, some people can’t get to work, the doctor, etc. Therefore, a car payment is often the first bill paid each month. If people are struggling with auto loans, it could mean bigger problems overall.
One key to avoiding defaulting in a car loan is to get a good loan to begin with. You can get a good rate by having a strong credit score (anywhere from 650 to 780). Once your budget and credit score is solid, being shopping around for the best loan available. Check credit unions and banks first, and only use a dealership’s loan as a last resort. According to the study, fewer than one percent of auto loans from credit unions are in default, compared to 6.5 percent from auto finance companies.