Car Repossessions Are Surging — What To Know

Consumers are facing a grim reality when it comes to car ownership nowadays. Between high MSRPs and increasing financing rates, the number of drivers indebted to their vehicle is rising by the second. With life already on the expensive side, many drivers are facing troubles beyond their wildest belief. It’s become nearly impossible to adapt to the increased expenses. Or, at least accept that it’s happening. Sad to say, the upsurge has led to an unprecedented number of car repossessions. For drivers who love their cars but can’t make the payments, the financial burden is far too much.

What is leading to car repossessions?

As we approach the third quarter of 2022, things are looking pretty bleak. Car prices are still well above MSRP, inventories haven’t replenished, and loan rates are on the rise. Car buying is not ideal. According to the U.S. Bureau of Labor Statistics, consumer prices are up 8.6 percent from May 2021. This amount marks the highest 12-month increase since December 1981. So, the question now is — How did we get here? 

Pandemic purchases

When the pandemic hit in 2020 and the world subsequently shut down, thriving businesses began taking desperate measures to get patrons back in their stores. As millions of businesses were affected, the automotive industry was no exception. Dealerships across the nation sat empty with customers far and few in-between. To remedy the loss in sales, dealers began offering mind-boggling discounts on in-demand models and 0% APR financing just to get new buyers in their doors (or online). Despite the uncertainty of the pandemic, many buyers jumped at the opportunity. These enticing offers were too good to pass up. Not to mention, unemployment benefits, debt extensions, and stimulus checks added extra funding in the pockets of millions of Americans.

Unfortunately, the graciousness of loan forgiveness and additional funding didn’t last forever. With things seemingly back to normal and the financial burden of today’s economy fully on the hands of consumers, hard times have risen. This has created a rapid increase in car repossessions for vehicles leased or financed in the last few years. Those who got into their dream car for a fraction of the cost, are still feeling the aftermath of an expense purchase. Some car payments upwards of $600 or more have created tight monthly budgets for the average household. As if things weren’t bad enough, the price of insuring these vehicles has also skyrocketed. All things considered, impulsive buys during the early stages of the pandemic are catching up to a number of Americans this summer.

Fragility of the economy

Apart from the current hardships within the automotive market, the rise in car possessions also demonstrates the failing health of the economy. In a bad economy, Americans are unable to get ahead. Debt piles up and there is little wiggle room for unexpected costs. As most drivers know, a car loan is one of the biggest monthly expenses that people pay, aside from rent or mortgage payments. Because of this, the economy becomes rather unstable and the average household struggles to keep up with bills. Though we can learn from past mistakes such as the 2008 recession, the reality is rising inflation can get the best of any household.

With this in mind, debt collectors are eager to get their possessions back. Should you miss even one or two payments in an economic downturn, it gives them enough ammo to take action. Many automotive experts have predicted this downturn for quite some time, however, the direct impact on the consumer is unimaginable. If you rely on your vehicle frequently to get to work, take commutes, or meet family obligations, the aftermath of a car repossessions is detrimental. Not only will it affect your day-to-day lifestyle, on average it takes about seven years for a repossession to get taken off your credit report. Now just imagine how badly this will damage the future prosperity of the American people.

Car repossessions subside with economic recovery

Although we don’t have the an instant solution to the current economic climate, we do have hope for the future. It’s with anticipation that the number of car repossessions will reduce in time, since the majority of buyers being affected are 2020 and 2021 car deals. In any case, car repossessions not only hurt your credit, they may cost you thousands of dollars that you don’t already have. If the bank resells your vehicle for less than you’ve financed, you’ll be obligated to pay the difference. On-the-whole, it’s best to get ahead of the problem before its too late. If you know you’ll miss payments in the upcoming months, consider the following steps to help ease the scenario:

1. Contact your lender. Honesty is usually the best policy. In general, it will look worse for you to wait until several payments are missed versus telling them you are having financial struggles from the beginning.
2. Consider debt consolidation. This option may lead to a lower interest rate and monthly payment to help you survive the trying financial times.
3. Don’t be afraid to negotiate. Going off of the first point mentioned, unpaid car loans are more of a hassle than an advantage for lenders. See what options are available instead of avoiding the situation altogether.
4. When all else fails, try selling your car. If other options are available, the easiest thing to do is sell. List your sedan or SUV for sale before the debts stack up.

In conclusion

Car repossessions are harmful to your quality of life and financial standing as a whole. As a result, until the economy recovers back to pre-pandemic times, it’s important to figure out ways to ride out the storm. Whether that be car pooling to work or trying an alternative means of transportation, there are several options that help reduce the expense of car ownership these days. Overall, we hope this article was both informative and helpful for those who want to know more about the current spike in car repossessions. If you’re feeling the pressures of car expenses lately, we suggest you consider a sale to help ease the burden.