CHICAGO–Many young consumers are starting to wilt under the weight of car loans, according to a new analysis from TransUnion.
The credit bureau is reporting that many Generation Z and Millennials now have auto loan delinquency rates that are significantly higher than their pre-pandemic levels.
According to TransUnion, Gen Z, which includes those born in 1995 and after, has a past-due rate of 2.21%, compared with 1.75% before the pandemic. Millennials, those born between 1980 and 1994, have fallen behind on car loans at a rate of 2.14%, compared with 1.66% before the pandemic.
NBC News reported those delinquency figures are coming at the same time the costs of automobiles is at near an all-time high, with the sticker price on the average new car now at $46,526, just below the record $47,000 average cost seen in January of this year, according to Kelly Blue Book.
The Cox Automotive/Moody’s Analytics Vehicle Affordability Index hit its worst mark on record in April, showing the number of median weeks of income needed to purchase the average new vehicle now stands at 40.6 weeks — nearly one year’s worth of pay — from a downwardly revised 40.2 weeks in March, NBC News added.
‘Much Worse Now’
“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% from last year.”
Meanwhile, as CUToday.info has reported, the total volume of auto loans continues to decline. In the past three months of 2021, according to TransUnion, the number of loans originated dropped by 3% to 6.5 million from the same period the previous year.
“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 May 23 blog post reported by NBC News. “On top of increasing vehicle prices, rising inflation will also have an impact on consumer purchasing power. To help keep monthly payments in check, we anticipate lenders may offer consumers options like lengthened loan terms to offset affordability challenges.”
Cost of Living a Top Concern
The cost of vehicles is just one skyrocketing expense every generation is now facing. Still, NBC News noted, a new survey of Gen Z and Millennials by Deloitte found cost of living was the top overall concern for both groups, ahead of other issues such as climate change, unemployment, mental health and personal safety.
For credit unions, the Deloitte findings reinforce the need for the kind of guidance and counseling the movement is known for.
"Financial anxiety is widespread among Gen Zs and millennials," Deloitte stated. "They are worried about their day-to-day finances, and fear that they won’t be able to retire comfortably."
Deloitte also found nearly half of both generations were living paycheck to paycheck, and worry that they won’t be able to cover their expenses, with 30% of both groups expressing general financial insecurity, NBC News said.
Additional Findings
Deloitte further found:
- One-third of Millennials and 43% of Gen Zers have taken on side jobs in addition to their primary employment.
- 26% of Gen Zers and 31% of Millennials said they were not confident they would be able to retire with financial comfort.
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