Food and rent, lights or the car payment?
When faced with choices on a budget already stretched to the max it’s often the car or truck payment that’s left to chance and it’s getting worse.
A new study revealed Michigan has the seventh highest percentage of auto loan balances with more than 90 days of delinquency.
“Michigan First Credit Union continues to see delinquent payments steadily climbing,” said Jeff Fitrzyk, chief lending officer for the credit union that has branches in Macomb and Oakland counties.
“We’re also seeing an increase in repossessions, both voluntary and involuntary,” he added, noting people are dealing with inflationary pressures that demand their immediate attention and one of the things that often falls behind are auto loans, which seem to be returning to their pre-COVID levels.
The stimulus checks given during the pandemic went a long way to help people pay their bills. In fact, delinquency rates on auto loans at that time were at a record low.
But that money has been spent and now lenders have the added pressures of higher interest rates.
“They’re at the highest we’ve seen since 1980,” Fitrzyk said.
Now tack on auto insurance.
“Southeast Michigan has the highest auto insurance rates in the nation,” Fitrzyk said, adding legislators in Michigan have not done enough to force insurance companies to offer lower rates.
However, Michigan is not the only state suffering.
The numbers
The study by wrongful repossession attorneys at Thompson Consumer Law Group analyzed 2022 and 2023 auto loan data from the Federal Reserve Bank of New York to see which states had the highest percentage of auto loan balances delinquent for more than 90 days. A loan becomes delinquent once a borrower misses a payment.
Their results showed it’s not only a problem everywhere but it’s increasing.
Between 2022 and 2023, the percentage of auto loan balances over 90 days delinquent in America increased from 3.81% to 4.2%, and every state experienced an increase. Michigan actually dropped one place from sixth in 2022 to seventh in 2023 but it is still in the top 10 with 5.24, which is 25% above the national average.
The study showed these states with the highest percentage of auto loan balances delinquent:
• Mississippi: is 6.77 above the national average
• Alabama is second, with 6.05%
• Georgia is third, with 5.71%
• Louisiana is fourth, at 5.69%
• Indiana rose two places from seventh in 2022 to fifth in 2023 with 5.29%
• Hawaii saw a dramatic increase in delinquent auto loan balances between 2022 and 2023, rising 25 places, with 5.24%.
• Delaware now follows Michigan, rising from tenth to eight with 5.2%
• South Carolina improved slightly, dropping from eighth to ninth with 5.2%
• North Carolina rounds out 2023’s top ten most delinquent states at 5.14%.
“When an auto loan has more than 90 days of nonpayments that is usually when lenders start to attempt to repossess a vehicle, so an increase of auto loan balances with more than 90 days delinquency will likely mean more repossessions,” said Russell Thompson, managing partner for the Thompson Law Group.
Among the five states with the lowest percentage of auto loan balances due were:
• Utah, at 1.89%
• Alaska at 2.09%
• New Hampshire at 2.1%
• Massachusetts at 2.2%
• North Dakota at 2.32%
Getting ahead
One of the biggest problems among those falling behind on their vehicle loans is ignoring the delinquency.
Fitrzyk, who has been in the banking business for more than 30 years, the past 15 of those being with MFCU, knows of several steps that people can take to prevent the worst case scenario, repossession.
“Personal budgets are getting squeezed but there are people and groups that can offer assistance,” Fitrzyk said.
One such group is GreenPath Financial Wellness, a national nonprofit with more than 60 years of experience in helping people build financial health and resiliency.
The group offers a variety of services that are all free such as:
• Financial courses including webinars or online easy-to-use financial education classes
• Worksheets and guides
• Debt calculator
• Tips for buying a car
• Financial calculator tools
“They do a lot of work to help individuals restructure a budget to reduce some of the debt they have,” Fitrzyk said.
Another way to help is to seek opportunities to consolidate your existing debt.
Fitzyk said credit card debt in the United States at the end of 2023 was about $1 trillion, which is another record high.
“Look into a debt consolidation installment loan,” Fitrzyk said.
This will help people get into a payment they can afford.
“It also helps to increase their credit score and get them lower interest rates,” he said.
Derrick Williams of Pontiac said he would recommend people talk to their lender.
“You and I both know that life can be unpredictable and being able to refinance on my car was a real relief,” said Williams, who drives a 2022 Chevy Impala.
Williams heard about refinancing and other programs offered by credit unions and banks to lower people’s monthly payments but never took advantage of them.
“I would definitely recommend looking into it. I was paying about $745 a month on my car,” he said. “Now my payment is $525.”
Williams was also able to get with another agent who helped to bring his insurance down, too.
Now instead of $430 a month, he’s paying $257.
“As members start to see they are struggling — that’s when they need to talk to their lenders,” Fitrzyk said. “Be up front with your lender. There are solutions that credit unions and banks can provide, tools that those facing delinquency might not be used to exploring. Let the professionals help.”
