Investing.com — A report from the Consumer Financial Protection Bureau (CFPB) released today found that the auto repossession rate at the end of 2022 surpassed pre-pandemic levels. The report also found that lenders have become more inclined to use third-party shippers to manage the return process, generally resulting in increased costs for consumers.
The CFPB’s analysis was based on data from nine major auto lenders that covered accounts active from 2018 to 2022. The findings highlight growing consumer risk in the $1.64 trillion auto loan market.
CFPB Director Rohit Chopra noted that supply chain disruptions and higher interest rates have increased the cost of buying and financing cars. He emphasized the importance of allowing borrowers to avoid the costly consequences of repossession, especially with outstanding auto loans exceeding a trillion dollars.
Car loans, excluding mortgage loans, are one of the largest sources of consumer credit. As of April 2024, there were more than 100 million active auto finance accounts and $63 billion in new monthly sources. Vehicle repossessing often results in consumers losing their primary mode of transportation to work, paying off outstanding debt and repossession fees, and facing potential negative effects on their credit scores.
Key findings in the report are:
- In December 2022, 0.75% of all outstanding vehicle loans were allocated for repossession, an increase of 22.5% compared to 0.61% in December 2019. This means that the number of vehicles eligible for repossession exceeded levels before pandemics.
- Lenders’ use of third-party shippers increased from 31% in January 2018 to 66% in December 2022. When a shipper was involved, the average return costs charged to consumers were higher.
- Consumers often remained in debt even after the lender repossessed their vehicles and sold them. The average outstanding balance for consumers who still had a post-refund balance was more than $10,000 in December 2019. Despite a brief dip, this average balance rose sharply to more than $11,000 in December 2022.
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