Yes, car repossessions saw a significant increase in 2022, surpassing levels seen before the pandemic. According to a new report from the Consumer Financial Protection Bureau (CFPB), by the end of 2022, auto repossession rates had risen above pre-pandemic figures, signaling increased financial strain for car owners across the nation. This trend highlights growing risks within the $1.64 trillion auto loan market.
“Supply chain shocks and higher interest rates drove up costs to purchase and finance a car,” stated CFPB Director Rohit Chopra. “With outstanding auto loans exceeding a trillion dollars, it’s critical that borrowers can avoid the costly consequences of repossession.”
The CFPB’s report, analyzing data from nine major auto lenders between 2018 and 2022, sheds light on critical shifts in the auto finance landscape. Auto loans are a massive part of the consumer credit market, second only to mortgages, with over 100 million active accounts and billions in new loans issued monthly. When a vehicle is repossessed, the impact on consumers can be severe, ranging from losing essential transportation to facing further debt and credit score damage.
Surpassing Pre-Pandemic Levels: A Clear Increase in Repossessions
One of the most concerning findings of the report is the clear jump in vehicles becoming eligible for repossession. In December 2022, 0.75% of all outstanding vehicle loans were assigned for repossession. This marks a substantial 22.5% increase compared to December 2019, when the rate was 0.61%. This data point confirms that car repossessions are indeed up in 2022 and significantly higher than before the pandemic disruptions.
This rise indicates that more borrowers are struggling to keep up with their auto loan payments, leading to a greater number of vehicles being repossessed. The economic pressures of 2022, including inflation and rising interest rates, likely contributed to this increased rate of repossession.
The Rising Cost of Repossession: The Role of Forwarders
The CFPB report also highlights a trend that further exacerbates the financial burden on consumers: the increased use of third-party repossession companies known as “forwarders.” Lenders are increasingly outsourcing the repossession process to these forwarders. In January 2018, forwarders were used in 31% of repossessions. By December 2022, this figure had more than doubled, reaching 66% of all repossessions.
The report found that repossession costs charged to consumers were higher when forwarders were involved. This means that not only are more cars being repossessed, but the process is also becoming more expensive for borrowers due to the increased involvement of these third-party services. These added costs can include fees for towing, storage, and administrative services, further deepening the financial hole for struggling consumers.
Debt After Repossession: A Continuing Burden for Consumers
A particularly troubling aspect of car repossession is that even after a vehicle is seized and sold, consumers often continue to owe money. The CFPB’s analysis reveals that the average outstanding balance for consumers who still owed money after repossession in December 2019 was already significant, exceeding $10,000. Alarmingly, after a brief decrease, this average sharply increased to over $11,000 in December 2022.
This persistent debt means that repossession is not the end of the financial hardship. Consumers may still be pursued for the deficiency balance – the difference between what they owed on the loan and the amount the car was sold for at auction – plus additional repossession fees and charges. This can trap individuals in a cycle of debt, even after losing their vehicle.
Conclusion: Navigating the Rising Tide of Car Repossessions
The CFPB’s report makes it clear: car repossessions were indeed up in 2022, reaching worrying levels. This increase, coupled with higher repossession costs and persistent debt after repossession, presents a significant challenge for consumers and highlights vulnerabilities in the auto loan market. For individuals struggling with auto loan payments, understanding these trends is crucial.
If you are facing difficulties with your auto loan, it’s important to know your rights and explore available resources. The CFPB encourages consumers to submit complaints about financial products or services through their website or by phone. By understanding the landscape of rising car repossessions, consumers can better navigate these challenging financial situations.
For more detailed information, you can read the full report: Auto Repossession Trends and Consumer Impact. You can also submit complaints or seek assistance by visiting the CFPB’s website or calling (855) 411-CFPB (2372).
