Redding, Chico and Eureka: Northern California’s Regional Centers

Americans are feeling the squeeze as car prices remain at record highs, leading to mounting auto loan debt and an alarming rise in repossessions across the country, according to recent industry data.

The average price for a new vehicle in the United States now hovers around $48,000, according to Kelley Blue Book figures. This represents a nearly 30% increase from pre-pandemic levels, when the average new car cost approximately $37,000. The used car market has seen similarly dramatic price increases, with average prices roughly 45% higher than in early 2020.

Financial experts point to a perfect storm of economic factors driving these sustained high prices. Supply chain disruptions that began during the pandemic continue to affect vehicle production, while semiconductor shortages have limited manufacturers’ ability to meet consumer demand. Inflation and rising interest rates have further complicated the market landscape.

“What we’re seeing now is unprecedented in modern automotive history,” said Marcus Reynolds, senior automotive analyst at Capital Market Research. “Consumers are paying more for vehicles while simultaneously facing higher borrowing costs, creating a dangerous financial scenario for many households.”

The consequences of these high prices are becoming increasingly evident in consumer behavior and financial health. Auto loan terms have stretched to record lengths, with the average new car loan now exceeding 70 months. Six- and seven-year loans, once considered extreme, have become commonplace as buyers attempt to keep monthly payments manageable.

Despite longer terms, monthly payments have still climbed dramatically. The average monthly payment for a new vehicle now exceeds $700, while used car payments average above $500 – both representing historical highs. These financial burdens are particularly challenging for middle and lower-income households.

Perhaps most concerning is the rising rate of delinquencies and repossessions. Recent data from credit reporting agencies shows auto loan delinquency rates have increased by approximately 20% year-over-year. Vehicle repossession companies report business has surged, with some operators seeing 30-40% more activity compared to pre-pandemic levels.

“We’re repossessing vehicles from people who have never missed payments on anything in their lives,” said Thomas Garcia, owner of a repossession company in Atlanta. “These aren’t just subprime borrowers anymore – we’re seeing middle-class families who simply can’t keep up with these payments alongside rising costs for everything else.”

The ripple effects extend beyond individual consumers. Credit unions and smaller financial institutions, which often have higher exposure to auto loans than major banks, are reporting increased stress on their loan portfolios. Some lenders have begun tightening credit standards in response, making financing even more difficult for buyers with less-than-perfect credit scores.

The Federal Reserve’s policies on interest rates have further complicated the situation. After multiple rate hikes intended to combat inflation, auto loan interest rates have climbed significantly. The average rate for a new car loan now sits above 7%, nearly double what consumers could secure just a few years ago.

Industry analysts suggest these conditions might persist through much of next year, with little immediate relief in sight for consumers. Manufacturers are gradually increasing production capacity, but demand still outpaces supply in many vehicle segments.

Some consumer advocacy groups are calling for increased regulatory attention to lending practices in the automotive sector. “We’re concerned about predatory lending tactics targeting vulnerable consumers who are desperate for transportation,” said Elena Washington of the Consumer Financial Protection Coalition. “There needs to be more oversight of extended loan terms and high-interest financing that can trap people in cycles of debt.”

For consumers navigating this challenging market, financial advisors recommend considering alternatives to traditional financing, including leasing or purchasing used vehicles that are several years older than they might typically consider. Experts also suggest delaying purchases when possible until market conditions improve.

“Transportation is a necessity for most Americans, which makes these high prices particularly burdensome,” said Dr. Michael Torres, an economist specializing in consumer finance. “Until we see significant improvements in vehicle supply or broader economic conditions, consumers should approach car buying with extreme caution and careful financial planning.”