The Detroit Bureau, a leading source of automotive news and analysis, recently reported on the potential increase in delinquencies due to decreasing vehicle values. This is a concerning trend for both lenders and consumers, as it could lead to financial difficulties for those who are unable to keep up with their car payments.
According to the report, the average price of a new car has increased by over $4,000 in the past decade, while the average length of a car loan has also increased to over 70 months. This means that consumers are taking on more debt than ever before, and are often paying for cars that are worth less than what they owe on them.
As a result, many consumers are finding it difficult to keep up with their car payments, which could lead to an increase in delinquencies and repossessions. This is particularly concerning for subprime borrowers, who are already at a higher risk of defaulting on their loans.
The Detroit Bureau notes that there are several factors contributing to the decrease in vehicle values. One of the main factors is the increasing popularity of leasing, which has led to a glut of used cars on the market. This has driven down prices for used cars, making it more difficult for consumers to sell their cars or trade them in for a new one.
Another factor is the increasing number of cars being sold with longer warranties, which has led to a decrease in demand for extended warranties. This has also contributed to a decrease in vehicle values, as consumers are less likely to pay extra for a warranty when they know that their car is already covered.
Despite these challenges, there are steps that consumers can take to protect themselves from delinquencies and repossessions. One of the most important steps is to carefully consider the terms of their car loan before signing on the dotted line. Consumers should make sure that they can afford the monthly payments and that they understand the terms of the loan, including the interest rate and any fees or penalties.
Consumers should also consider purchasing gap insurance, which can help cover the difference between what they owe on their car and what it is worth in the event of a total loss. This can provide valuable protection for consumers who are at risk of falling behind on their car payments.
In conclusion, the potential increase in delinquencies due to decreasing vehicle values is a concerning trend for both lenders and consumers. However, by taking steps to protect themselves and carefully considering the terms of their car loan, consumers can minimize their risk of falling behind on their payments and protect their financial well-being.
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- Source: Plato Data Intelligence.