So far this year, car repossessions are up 23% compared with the same period last year.
What Happened: According to Bloomberg, citing data from Cox Automotive, vehicle repossessions began increasing in 2023. They’re up 14% from the first half of 2019, exceeding pre-pandemic levels.
Vehicle seizures, which usually happen after three months of missed car payments, fell during the pandemic. Recall how lenders became more lenient and stimulus checks boosted borrowers' finances.
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But the Federal Reserve’s refusing to cut interest rates have led to heftier car payments. The average interest rate for a new car is currently 7.3% and 11.5%, according to Edmunds data.
As a result, the average monthly car payment has reached $739 for a new car and $549 for a used car.
The percentage of subprime auto borrowers who were at least 60 days late on their bills in June was 5.62%. That’s down just slightly from a record in February, according to Fitch Ratings, Bloomberg reported.
The Fed is expected to begin lowering its key interest rate ranging from 5.25% to 5.50% in September as inflation shows signs of cooling, a move that could give borrowers the chance to refinance or buy something else.
Price Action: Credit Acceptance Corporation (NASDAQ:CACC), a Michigan-based auto finance company, rose 3.89% to $607.72 by late-afternoon trading on Tuesday.
Exchange-traded funds (ETFs) that track Credit Acceptance also trended upward.
SRH U.S. Quality ETF (NYSE:SHRU) gained 0.61 as IQ Candriam U.S. Mid Cap Equity ETF (NYSE:IQSM) moved up 0.33% and RiverNorth Patriot ETF (FLDZ) improved 0.20%. Schwab Fundamental U.S. Small Company ETF (NYSE:FNDA) jumped 2.94% and John Hancock Multifactor Small Cap ETF (NYSE:JHSC) picked up 2.63%.
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