Both 30- and 60-day delinquencies have surpassed levels from before COVID-19, and the Consumer Financial Protection Bureau reports the percentage of auto loans transitioning into delinquency is rising at an accelerated rate. This is particularly evident among near-prime and subprime borrowers, whose delinquency rates are now surpassing even 2009 levels. But even prime borrowers are feeling the pain, with their share of repossessions doubling. Repossession companies are seeing a spike in business, especially for vehicles purchased in 2020 and 2021. Unless the risk from these rising auto delinquencies and repossessions is mitigated, credit unions may see increased charge-offs and a negative impact on overall financial performance.
Let’s explore five key factors driving auto loan delinquencies and a way for credit unions to mitigate this risk.
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