Why Americans Are Falling Behind On Car Loans

More than 100 million Americans have an auto loan and auto loan debt in the U.S. is at a record high of $1.56 trillion. Between the Covid-19 pandemic, supply chain issues, alleged predatory lending practices, inflation, and the Federal Reserve's interest rate hikes, getting an auto loan is getting increasingly difficult and costly. CNBC spoke with Chase Auto and Toyota Financial Services to learn what's happening in the auto loan industry and what consumers can do to make sure they're protected.

Chapters:
00:00 — Introduction
01:51 — How auto loans work
05:49 — Market changes
08:19 — Alleged predatory lending
13:19 — Consumer protection

Produced and Edited by: Emily Lorsch
Animation: Alex Wood, Jason Reginato
Senior Managing Producer: Tala Hadavi

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Why Americans Are Falling Behind On Car Loans

[TheGooglySmoog]

Nothing screams freedom like not having to pay a car loan.

[LURLINE_]

i swear some people need a 2k dollar repair on their car but they go out and replace it with a 30k loan instead

[huskiefan]

This can all be avoided by monthly budgeting, saving up, then purchasing a USED vehicle IN CASH. People love to impress strangers at a stoplight

[happycurls]

Man, i have a coworker that just bought a $75, 000 car and is paying $1100 per month. That's insane to me.

[csr]

The dumbest thing I saw during the car buying frenzy near the end of the pandemic was people taking out EIGHT YEAR, $80k+ loans on SUVs which were priced $20k over msrp after dealer adjustments and lame add ons like nitrogen gas in tires. They were tens of thousands of dollars underwater as soon they signed the contract and that isn't even factoring in depreciation.

[loufher]

In 2018, I bought a used 2015 Honda Civic with 34, 000 miles for $12, 500.... I got a loan from my bank at 4%...and paid the car off. Looking at loan prices and car prices today blows my mind at how INSANE it's gotten.

[rsxboss]

I went to a Nucar Toyota dealer, wanted to buy a Corolla Cross . The price on the website for the car on the lot was $370 a month . Excellent credit . Good trade in . They come back with over $500 a month nowhere near the advertised price . We left, left a bad review . They called me back and said they could do the advertised price, only because we left a bad review and corporate saw it . Dealers are scummy, be careful

[iceyaj]

My dad once told me "Son, never buy a vehicle that cost 50 percent or more than your yearly salary" I'm auto loan debt free to this day and afford to buy a decent home. Thanks dad!

[jasondima]

The dealerships don’t want to tell you how much the car is, they want to tell you how much the car payment is 🤦🏾‍♂️

[mwolf]

Crazy idea: whatever amount you would spend on a monthly payment, save it and pay cash. I decided no more auto loans and bought my last car in cash. People need to be more realistic with their budgets.

[hackman]

The REAL reason people are falling behind - people that cannot afford a car are still buying one because they have no alternative like public transit or bike infrastructure.

[Jinchuricki]

Yes, the auto industry is terrible, can we also cover the auto insurance industry. They always seem to escape scrutiny.

[CalmSnivy]

I graduated from college 4 years ago, and instead of a big trip, my parents helped me buy an 05 Corolla all cash. Easily the best gift of my life. The money that I saved on car notes ended up being saved while I was an entry level worker. I now live in a city with excellent public transportation and don't drive at all. Being debt free, to me, is better freedom than "owning" a car

[yearoldiam]

I was buying a new motorcycle about 2 years ago and I had excellent credit. The dealership was offering a 0% interest for 3 years promotion if your credit was good enough. I applied and they told me I was denied for the promotion and that my rate would be 11%. I literally laughed at them and said I'd be back tomorrow.
Went to my credit union where I bank and applied, and got approved at 3.75%. the dealership is never your friend.

[netogrof]

I worked in auto collections for a bank so I was well aware of the scams that dealerships play. So when I went to buy my car I read over everything. The dealership kept talking to my husband and he would defer to me, ‘she knows more than me and it’s her car’.

[stiggy]

As an ex car sales man, 90% of the people who walked into the dealer had no business buying a car and knew NOTHING about finance at all. There were many times I straight up told people they can't afford a car. So glad I got out of that Industry.

Edit: Thanks for all the comments and likes, I never knew my comment would blow up like this! 😂

If you have any other questions let me know.

[scottfranco]

I had a friend who was studying to become a lawyer, and as part of his studies, agreed to take part in a "sting" operation for car dealers. He was of Mexican descent, and spoke English and Spanish and looked Mexican. He would go to the dealers and pretend to only speak Spanish. They would present him with loan papers, in Spanish, that they then compared to the same paperwork provided by the same dealers in English. As you might guess, the terms given in Spanish were markedly worse than the ones given to English speakers. It got written up in the local newspapers.

[deeznuts-ljlv]

Not a single mention that consumers need to be more responsible. Do not buy more car than you need. I see so many people driving new cars that they simply cannot afford. There is a reason I continue to drive my 16 year old truck. The math isn’t hard, I think a lot of consumers are just not making good financial decisions.

[mitsu]

I will drive mine just like in Africa until everything fall apart and then tape and fix and drive more 😂

[hardygavin]

That Toyota VP was dodging questions like Beast Mode 😂