Last year, American car buyers and owners faced financial challenges due to rising vehicle prices and an increased cost of living. Adding to the strain, student loan payments resumed after a three-year hiatus when federal student repayment was paused during the pandemic, restarting in October. According to TransUnion, 36 percent of consumers with student loans took on automotive loans while repayments were on hold. Now, burdened with additional debt, these consumers are particularly vulnerable to financial risks, as highlighted by the credit reporting agency.
Travis Bowie, the general manager of auto finance at insurance company Jerry, noted that the combination of overall rising costs and accumulating debt is creating significant strain. In a December survey conducted using Pollfish, Jerry found that 28 percent of 1,268 Gen Z respondents admitted being more than 30 days late on a debt or rent payment due to the expenses associated with car ownership.
Bowie expressed skepticism about an imminent improvement, stating, "I don't really see an option where this gets any easier, at least until the car prices start to come down." He anticipates continued elevated delinquencies and defaults in the coming months.
According to TransUnion, as of May, 40.6 million individuals held student loans totaling $1.6 trillion. The average student borrower carries around $35,000 in debt, with some facing monthly payments exceeding $500.
Meanwhile, Experian reported that the average monthly loan payment for a new car reached $726 in the third quarter of 2023, marking an increase of over $100 from the same period in 2021. For used-vehicle loans, the average monthly payment rose to $533 in the same quarter, up from $473 in 2021.