Millennial and Gen Z car owners have been defaulting on their car loan debt at a higher rate than they did before the pandemic, according to data from the TransUnion credit bureau analyzed NBC News.
Delinquency and default rates are “significantly higher” than they were before the pandemic, the report states.
“Gen Z, which includes those born in 1995 and after, has a past-due rate of 2.21 percent, compared with 1.75 percent before the pandemic,” NBC reported. “Millennials, those born between 1980 and 1994, have fallen behind on car loans at a rate of 2.14 percent, compared with 1.66 percent before the pandemic.”
It is a trend that coincides with high inflation, record-high car prices due to a supply shortage and a decrease in the total number of car loans overall.
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“Supply shortages have driven up vehicle prices, and the shutdown of international factories will lead to a growing lack of inventory throughout the remainder of the year,” TransUnion said in a recent blog post.
“On top of increasing vehicle prices, rising inflation will also have an impact on consumer purchasing power,” the bureau continued. “To help keep monthly payments in check, we anticipate lenders may offer consumers options like lengthened loan terms to offset affordability challenges.”
Cox Automotive/Moody’s Analytics Vehicle Affordability Index also showed car prices hit their highest levels in April.
“New-vehicle affordability continues to be much worse now than it was a year ago, when prices were notably lower and incentives were higher,” Cox said in a news release. “The estimated number of weeks of median household income necessary to purchase the average new vehicle in April was up 18 percent from last year.”
PHOTO: In this May 19, 2019, file photo, a line of unsold 2019 Tucson sports-utility vehicles sits at a Hyundai dealership in Littleton, Colo. (AP Photo/David Zalubowski, File)