Auto loan delinquencies have risen to the highest level in over 10 years, according to TransUnion. TransUnion tracks more than 81 million auto loans in America. According to the agency, 1.65% of auto loans were at least 60 days delinquent in the third quarter.
Consumers still want to stay current as best that they can. However, this inflationary environment is making it challenging. With prices rising and real wages falling, many Americans are struggling to make ends meet. They are increasingly turning to credit cards and other debt to fill the gap.
The average interest rate on new vehicle loans rose to 5.2% in Q3. Interest rates on used vehicle loans average 9.7%. Combined with the rising cost of both new and used vehicles, along with rising fuel prices, the cost of ownership rose dramatically. This will force many Americans to wait longer before trading their vehicles.
Now that FMC is turning all its vehicle line ups to BEVs, which consistently are more expensive than their ICE counterparts, and taking into consideration that consumer's savings are quickly being depleted and debt has limits, all the signals point to a big slowdown for FMC. Already having the lowest profit margin among all the vehicle manufacturers, a big slowdown means an even lower profit margin (if any at all).
Of course, this situation will only accelerate the lay offs of the NA workforce. I am expecting a more aggressive pursuit of offshoring white collar jobs, while closing plants under UAW.