This Money Expert Says the Car Market Is Broken: 5 Things To Know
Written by
Jamie Stone
Edited by
Zuri Anderson
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Jaspreet Singh, founder of the Minority Mindset YouTube channel and personal finance expert, warns that the U.S. car market is fundamentally broken.
New vehicle prices have topped $50,000 while auto loan delinquencies reach historic highs — a troubling combination that suggests Americans can no longer afford the cars they’re buying. Here’s what you need to know.
New Vehicle Prices Top $50,000
Singh explains we’ve never seen this before: Delinquency rates on car loans are at the highest rate we’ve seen, not in five years or 10 years or 20 years, but in recorded history. But on the other hand, people are buying cars and paying the highest prices we’ve ever seen for new cars in reported history.
This paradox leaves consumers scratching their heads wondering whether the car market is booming or the bubble is about to burst.
Delinquencies Hit Record Levels
Singh emphasizes that it’s valuable to understand what has happened over the last few years in the car market to understand where we are and where we might be going. Because in 2019, what was considered normal was a new car cost about $38,000 on average.
The current situation is far worse. Over 6% of subprime auto loans are now more than 60 days delinquent, the highest on record, according to Fitch Ratings data. Additionally, the Federal Reserve shows that auto loan delinquency rates were at 3.8% in June 2024, the highest level since June 2010, as reported by CBS News.
The Perfect Storm of Affordability
Several factors have converged to create this crisis. Larger auto loan amounts at origination, rather than increases in interest rates, explain most of the increase in delinquencies, according to Federal Reserve research. Borrowers demanded larger loans as car prices surged, and lenders relaxed credit standards to originate these loans.
Now, with interest rates elevated and loan amounts larger, monthly payments have become unsustainable for many borrowers. Vehicle repossessions surged to 1.73 million last year, the most since 2009, demonstrating the severity of the affordability crisis.
The Bottom Line
Singh’s analysis reveals a market under severe strain, indicating that middle-class Americans face unprecedented challenges in affording reliable transportation despite continuing to purchase them. The question isn’t whether the market is broken — the data confirms it is — but rather when and how this bubble will burst.
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