As the economic recovery expands to the average American consumer in the form of low unemployment, low interest rates, and cheap gas, sales of new cars have been picking up. That means an expansion of borrowing to make those purchases, as well — the highest average amount ever, in fact. The average monthly new car loan payment has risen to $493, according to Experian Automotive.
Many analysts are predicting a risky path forward for the auto-finance industry as a result, with fears that many of those borrowers are headed for a default. American Public Media’s Marketplace summarizes the debate:
The car loan business is healthy:
1) The majority of loans are going to people with good credit, so-called prime and superprime borrowers.
2) 2015 was a smash year for new car sales and 2016 is starting off strong.
The car loan business is scary:
1) Troubled loans are on the rise, nearing $1.1 billion last year.
2) The astounding post-recession run of new car sales can’t last forever.
Either way, greater numbers of borrowers will undoubtedly mean a corresponding uptick in the need for collection agencies to service troubled accounts.
Make sure your company is prepared for the coming wave auto-debt: Orion State Licensing can get you licensed in every state and territory, and make sure your existing licenses are up-to-date and in compliance.