Consumers in Financial Hardship with Car Finance Loans Decreased

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The end of the 2nd quarter brought a lot of positive news. Not only that unemployment dropped but fewer consumers are facing financial hardships. Plenty of positive signs across the board especially for the car finance sector.

TransUnion released a report accounting for the percentages of accounts in financial hardship status. The report contained the numbers for each month since March. The peak of consumers in financial hardship on their car loans dropped significantly from June. June has been the absolute peak as 7.2% of consumers with a car finance loan were in financial hardship. July saw a decreasing trend with just 6.16% of consumers being in financial hardship for car loans.

The numbers show a positive trend across the board. The only financial area that did not saw a considerable improvement is personal loans. For the automotive industry, things are looking increasingly better. However, car sales are still very low for the U.S. market.

Looking at some other metrics, in Q2 2020 there were 83.5 million auto loans compared to 82.7 million loans in Q2 2019. Borrower delinquency rates are also within reasonable numbers with just 1.5% of all car finance loans having payments that are 60 or more days late. This number does not take into account the 6.16% of consumers that filed for the Financial Hardship program. The debt per borrower has increased by approximately $500 over the past year which is in line with the reduced loan interests and the inflation in new car prices.

Overall, the automotive market still has a long way to get back on track to the performance before Q1. Many large automakers are already looking at ways to reduce costs. Meanwhile, consumers manage to pay their car loans but very few now consider financing a new car based on their financial situation. The unemployment rates are still high. For consumers that have a stable financial situation, considering a car finance loan may be worthwhile since a lot of dealers are offering discounts to clear out their inventory.