Why Owners Are Falling Behind on Car Payments at a Record Rate — and How To Get Caught Up
Written by
David Nadelle
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The auto industry is still reeling from the blowback of production plant shutdowns and supply chain disruptions caused by the pandemic. Three and a half years later, prices for all vehicles remain stubbornly high, and a record number of Americans are having difficulty keeping up with car payments.
As Bloomberg reported, Fitch Ratings has found that more subprime borrowers — those with lower credit scores and are likely to have multiple negative factors in their credit reports — were 60 days or more behind on their car payments than in any other time on record.
In September, 6.1% of U.S. subprime borrowers were behind of their vehicle payments, up from 5.9% in August and the highest Fitch Ratings has recorded since it began to track this stat in 1994.
Why Are U.S. Car Owners Falling Behind on Their Car Payments?
According to Kelley Blue Book, the average price for a new car rose slightly in October (to $47,936), but this bucked the trend of prices in 2023, which have been on a steady decline. Used vehicle prices have fallen 0.6% from September to October (to $26,533) and 3% year-over-year.
Even with prices falling, car owners are having a tough time coping with a U.S. economy that has been strong in many regards, but unpredictable in others. Inflation is still above Federal Reserve targets and like groceries, car prices can’t seem to fall enough to make a real difference.
Automakers continue to produce higher-priced vehicles instead of affordable ones, but the big reason that car owners are falling behind on their payments is rising interest rates. The percentage of car owners that pay at least $1,000 jumped to 17.1% in the second quarter of 2023, per Edmunds.
How Can You Get Caught Up on Your Car Payments?
There can be any number of reasons someone could fall behind on their car payments, and doing so can sometimes cause irreparable financial damage. Luckily, regularly missing car payments isn’t a lost-cause situation. There are options available from lenders that may help alleviate the financial and emotional strain that comes with always being behind on your monthly vehicle payments.
1. Get in touch with your lender early
You might think that your lender wants you chained in debt to them for eternity, but that’s not true. Most have relief or hardship programs in place for those falling behind and contacting them early will put you in a better position for options and shows that you want to solve this problem in good faith.
“Communication is really critical. Talk to your lender, and they’ll likely want to work with you, especially if you’re a loyal customer,” Jeff Huang, sales supervisor at Westlake Financial Services, an L.A. national auto financing company, tells USA Today. “They don’t want to take the car back.”
2. Try to change your payment date
Sometimes your payment date can constantly fall between pay periods when your account balances are low, and be a hurdle to getting on top of your finances and controlling your cash flow. There is absolutely no reason your payment date can’t be changed. Lenders are often amenable to switching due dates up if that is the reason you’re missing too many payments.
3. Negotiate a new car loan payment plan
If you’re unhappy with your current payment schedule, try to modify it. According to the Consumer Financial Protection Bureau, if your monthly car payments are too expensive, your creditor may offer you a more reasonable rate or you can ask to stretch out your loan’s term and lower your monthly payments.
Barring that, you can request an extension or postponement on a payment or see if splitting your payments up, like twice a month, will help spread out the one-time monthly hit.
4. Consider Selling or Downsizing
If you find yourself struggling to stay on top of your car payments, you might need to consider downsizing your car or selling it outright. You could use the money from the sale to buy a more affordable vehicle, with better financing terms, or pay off an existing loan.
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