Millennials And Gen Z Can't Afford Their Auto Loans, And It's Only Getting Worse

[BlueWaveNeverEnd]

it’ll come as a surprise to no one, but Gen Z and Millennial car buyers are falling really far behind on their car payments. In fact, it’s happening at rates we haven’t seen since the financial crisis of 2008 and 2009, according to Automotive News. The problem is only going to get worse, too. Remember, young folks aren’t paying back their student loans right now, but that’s all set to change soon.


On average, AutoNews reports that 3.58 percent of 18 to 29-year-olds and 2.62 percent of 30- to 39-year-olds have been late on their auto loans by at least 90 days. For some context, just 2.13 percent of all borrowers are late. Keep in mind, these numbers are overall. In the first quarter of 2023, 4.55 percent of 18- to 29-year-olds were at least 90 days late. 3.66 percent of 30- to 39-year-olds were equally late. We haven’t seen numbers like these since The Great Recession.

A spokesperson for Jerry, an insurance comparison site, told the outlet that the growth in delinquencies from the first quarter of 2022 to the first quarter of 2023 is the sharpest of any 12-month period in the Fed’s 23-year data set.

Interestingly, the amount of money borrowed for vehicles in the first quarter of this year by young people dropped 25 percent from the same time last year. It represents the largest quarter-over-quarter drop in the Fed’s data. Part of the reason for this may be the tightening by lenders of who they’ll give money too.

https://www.msn.com/en-us/money/markets/millennials-and-gen-z-can-t-afford-their-auto-loans-and-it-s-only-getting-worse/ar-AA1dPtWY

[Blues Heron]

1. Fleet sharing is the way to go- like Free2Move, car2go etc.

Solves a lot of problems in cities like parking, traffic etc.

[snowybirdie]

2. An old junker is rarely

seen these days. What's wrong with driving an older, but well running car? Today's constant ads focus on new, better, flashier cars and young people think they have to have them. Maybe that's not the wisest thing when building an adult life?

[viva la]

3. There are no cheap new cars...

And good used cars are getting rarer because most of us keep cars for years.i was looking for a used car under $10k and 100K miles.... couldn't find one. I don't want a junker because you can't fix them yourself with all the electronic parts, and repairs always run into the hundreds. And I can't afford to miss work because the car doesn't work.


Cars are better than ever, safer and more reliable. But thst comes at a price. Car payments are typically at least $500 or more a month, and for many young people (and me... I'm not young, but my academic staff job pays $18 an hour), this is like 20% of their take home.

Are there any low cost new cars? The auto companies used to ar least provide a few models for us.

[MineralMan]

22. Define cheap.

Right now, the basement for new cars is about $20K. There are a few in that price range. All are small.

Cheapest new car right now is the 2023 Mitsubishi Mirage, that starts around $17.7K. Is it a great car? It is not. But it is a brand new car with a pretty good warranty. Here are some others:

https://www.cars.com/articles/here-are-the-10-cheapest-new-cars-you-can-buy-right-now-421309/

[Celerity]

34. agree

[iemanja]

42. Don't most cars sell a good deal over list price these days?

Add to that the high interest rates. That's why I'm sticking with my 2007 Camry.

[Celerity]

45. Here is a listing for new 2023 Mirages in the US, if you are wondering about prices.

https://www.cars.com/shopping/mitsubishi-mirage-2023/

You have to enter in your postal code and distance to extend the search in order to get an accurate reading.

Interest rates are not an issue for us, as we pay cash, but I can easily see people getting hammered, as the US seems to have far fewer consumer protections and a very predatory mindset on balance than I have seen over here in the EU and the UK.

We did not have to purchase a car whilst I read for my MBA in Los Angeles, we had access to one via my father. I hated driving there at first (wrong side of the road!), but got used to it. Of course Sweden is also, like the US, right-hand traffic, so now I am used to both. In fact, when we go back to London or Barbados, left-hand traffic now seems a bit strange at first, lolol.

[MineralMan]

49. Thanks. Yes, you can get a Mirage for MSRP or lower.

Of course, a lot of people wouldn't even call that a car. Good warranty, though, and an OK around town car. Makes a good college kid car, I think. I'd drive one, except I wanted AWD, so I ended up with a Chevy Trax for $24K out the door.

[Progressive Lawyer]

38. Except there are very few dealers offering those types of cars at MSRP.

Those cars are unicorns....perhaps one available model in a 200 mile radius.

[uponit7771]

47. +1

[MineralMan]

48. Not the Mitsubishi.

They're available.

However, some of the cheap cars can be hard to find, as you said. When I bought our Chevy Trax, for which I paid $24K out the door, I had to park on a local dealer's website and reserve one when it was in transit. Fortunately, the dealer put it in inventory before it arrived, so I could put a deposit on it a week before it showed up at the dealership.

That was in 2021, during the big car shortage and COVID. I got it, though. Works great as a daily driver.

[viva la]

55. How about long distance?

For driving vacations? Would the car be okay for that? I just mean non-winter highway driving, not the rough stuff.


I checked and for a new car, the dealers around here wanted about 20% down, so $4K on a $20K car. Wow. I assume a decent trade-in would bring about that.

I think I'll keep my 2018 for a few more years. Fortunately, in my head, it's early 2020, so the car is only 2 years old.

I don't know why my brain keeps telling me the pandemic hasn't happened yet. Date dysphoria.

[MineralMan]

56. I wouldn't choose the Mitsubishi Mirage for that use.

Instead, consider the KIA Soul, which is somewhat more expensive. It's a good road trip car, with more power, a more stable ride and feel, and just a better overall car.

[viva la]

57. I think my next car will be a hybrid.

I am not quite bold enough to let go of the gas option yet! But I love that 55 mpg.

[viva la]

54. I actually have never spent that much on a car--

So I guess "cheap" would be more like $13K for me. But then, I really am cheap!

Back when interest rates were 3%, the payments on $20k might have been affordable to me. But not now. I try to buy low mileage used cheap cars, then keep them for 5 years, and give it to a kid or grandkid at that point.
(Cars are a lot more reliable now, well into the 100K range, so that usually works.)

[MrsCoffee]

4. Used car prices are at an all time high.

For a few years now.

We had $5k to spend for a used car for my son four years ago. It took two years to find a decent car for that price. I know prices are higher here in the bay area, but that was ridiculous.

Simple economics tells us that lower supply coupled with high demand will drive higher prices. Before the pandemic, the average price of a used car was $19,827, but it's now $26,686 (a 35% increase).

[Mariana]

5. A lot of old cars won't pass inspection for emissions or safety

and need expensive work to get them to pass. When it costs more than the car is worth to make it street legal, the car gets junked.

[BlueWaveNeverEnd]

16. my car passes inspection.. 12 year old car. It doesn't have the backup cameras, computer screen and

dood dads that all my friend's cars have.

[DFW]

18. Same here, although my car is "only" ten years old

None of the fancy stuff. It was all optional at the time I bought it, but I said, look, I'll never use any of that stuff anyway, so I opted not to have it. Ironically, my wife borrows it all the time, because her new car, with a couple dozen standard electronic features we have yet to figure out, needs repair all the time. As long as she's willing to get up at 4:00 AM to drive me to to the train station or the airport, she's welcome to it! That's pretty much what I needed it for in the first place, except to go food shopping.

[Mariana]

27. My favorite car that I ever owned got totalled last month.

It was 14 years old, looked almost like new and ran perfectly.

Snowybirdie specifically asked about "old junkers", which generally means a car that's beat to hell but still runs. My car wasn't an "old junker" and i bet yours isn't either. Most "old junkers" aren't allowed on the road anymore.

[Mr.Bill]

31. Cash for Clunkers took a lot of cheap cars out of the market.

They were poor gas mileage cars, which was the whole idea, but they were good entry-level cars if you didn't drive a lot of miles and burn much gas.

[Mariana]

32. Cash for Clunkers ended in November 2009.

How many of those cars do you think would still be on the road in 2023, if Cash for Clunkers had never happened?

[Mr.Bill]

33. What's more important is what it did to dealer auto auctions.

Before CfC, a dealer could go to an auction, buy a car for 3-5K, then sell it for 6-8K. That vanished almost overnight. If a small used car lot wants to bring back three decent cars from the auction, plan on spending 30K minimum. Just way less cars now at the auctions in total.

[Progressive Lawyer]

37. Some states still have an active "Cash for Clunkers" program. California for example.

[RANDYWILDMAN]

6. Planned obsolescence is real

and is getting worse.

I worked in the auto industry 22 years ago, Kia, to keep their cars cheap, hardly made any replacement parts, they sold a lot of cheap cars, their cars are no longer cheap.

[obamanut2012]

8. There are very, very -- the pandemic destroyed the used inventory

[Jspur]

10. You seems like an out of touch old person and

I say this as an elder Millennial who just turned 40. I currently have a 2011 Honda Civic that I have kept for 12 years. It's still in good shape and has close to 100K miles on it. The last few years I have been getting offers for it for in the 10K-12 K range which is insane since it's an old car. Prior to the pandemic I could have sold my car for somewhere between 2-3K on the open market now I can get 4-5 times that value on the open market. This clearly shows how out of control car prices are now.

[snowybirdie]

23. Bingo!

Old, out of touch and drove older cars when I was in my 20s. I remember a 1955 Ford Fairlane with fondness. Seeing my grandchildren buy very expensive new or nearly new cars and juggling school loans and credit cads. My point was that we always don't have to have the newest and flashiest things but advertising has convinced many that is what is necessary for a happy life. Too many spending beyond their means to remain cool, or whatever word is in vogue nowadays. And don't get me started on concert tickets......

[Happy Hoosier]

36. I just don't buy used cars anymore...

I did at one time, but I just found I was buying someone else’s problem 2/3 of the time. Now I buy the best car I can afford and drive it a ling time kept my last car 13 years. My way de’s can is now 13 years old and mine is 5. The new cars have been way less hassle for me. I tend to buy a well-equipped car, but not necessarily loaded.

[Jspur]

39. My point was that most young people I have seen try to get cheap and used cars but

they have become expensive to the point where even they are not affordable anymore. I definitely see where you are coming from with your grandkids buying expensive cars which I do agree with you is not a good decision. I personally hate cars since I see them as a depreciating asset. It's why I'm hoping to continue to stretch out my 2011 Honda Civic as long as possible.

[Act_of_Reparation]

17. "An old junker is rarely seen these days"

Citation needed.

[Sky Jewels]

21. Old junkers are major expenses waiting to happen.

You never know when you'll get hit with a $2,000 repair bill just to keep the damn thing running.

[Mariana]

28. Not to mention, it might get benched at the next annual inspection.

I got rid of an old junker (22 years old) a couple of years ago after it regularly failed annual inspections. The first couple of times were relatively minor fixes, but the last one would have cost more than the car was worth.

[Sky Jewels]

43. Right.

“Cheap” cars are often not!

[iemanja]

41. mine is a 2007

and while it doesn't look great, it drives well.

[pstokely]

46. what is a junker?

a young but high mileage BMW?

[dembotoz]

7. currently in the market for a used car..just not much out there

looking hard 100 mile radius

fun driving a hundred miles to see a car that a local mechanic gives the thumb down to

did it twice last week

[A HERETIC I AM]

26. " looking hard 100 mile radius"

That’s your problem right there.

Expand your search area, for crying out loud.

[Hugin]

9. The ladders have been pulled up to the point...

It’s impossible to be in the so-called middle class.

Millennials and Gen Z have been forced to divide their lives into about five halves.

[FakeNoose]

11. The American manufacturers are to blame for this - they refuse to make affordable cars

All they want to sell us are the gas guzzling high-priced cars, SUVs, and luxury models. They think we're all millionaires just like them. Make no mistake, they could easily build affordable cars, but there's less profit in those. It's just like today's home builders - everything they build now are McMansions that nobody can afford.

[Jspur]

12. It's done by design they know most people can't

afford these expense products but they can still make a lot more money selling a few expensive products vs selling thousands of cheap affordable products.

[bedazzled]

15. You can say that again

It's criminal how there are no American small cars anymore

[gulliver]

13. The headline is a lie unfortunately

The body of the article shows that the headline is a lie. Add the word "Some" or, more accurately, "Small Percentage of" and the headline is no longer a lie. Left a lie, it becomes a slogan/blip for intergenerational resentment that less adept critical thinkers might fall prey to, muddying up political waters.

There isn't much that can be done about headline lies. People just need to read the articles instead of only the headlines, then adjust their sense of the source's reliability downward if there is any noticeable discrepancy. There certainly is here, so, this is a strike against www.msn.com.

It would be helpful to know which Gen Zers and Millennials are having problems, by the way. Are they hard working? Did they educate themselves with knowledge and skills that pay? The article shows that the vast majority of these folks have no problem, and that's certainly my experience. The ones who are having problems? Why?

[sky_masterson]

14. My 2001 Tacoma 4wd has 106,000 miles on it

Drove it 22 years and I'll drive it until I can't drive anymore. Got a request to buy it at mcdonalds the other day. These old Taco's just keep going and nobody wants to part with them. Would cost me well over 40,000 bucks to get a brand new equivalent.

[Jspur]

40. I have 2011 Honda Civic and have close to 100K on it

but feel the same way about my car that you do about your Tacoma. I want to keep riding it until I can't do it anymore. I'm hoping I can make it last for at least the rest of this decade.

[womanofthehills]

50. I have a 2008 Toyota RAV4 with 200,000 miles

Still going strong. Never had a major problem.

[onethatcares]

19. all they have to do

is wait until Xmas and their significant other will have a brand new pick up with a bow on it in the driveway outside the mcmansion.

Sheesh, don't you guys believe in capitalism anymore?

I did see an ad for a 2023 monster pickup with the bells and shiny paint with an msrp of $59K the other day.. What a bargain

[Mosby]

20. I wonder why some of them can't make their payments?

Link to tweet

[GoodRaisin]

24. These people must be making incredible paychecks too.

My car payment is $412 and I thought that was high.

[inthewind21]

25. Exactly

[Liberal In Texas]

29. And this isn't taking in to account the length of the loan:

Payments can be 24, 36, 48, 60, 72, and 84 months long.

84 Months! 7 years!

[pfitz59]

30. I pay $448 a month

and my car gets 50 mpg. Those fools were sold gas-guzzling ego cars.

[mn9driver]

35. Just bought an 18 year old Toyota for $6000

147,000 miles, new tires, new motor mounts, no rust.

It’s safe, gets good gas mileage from the tiny engine and has no cameras, displays, Bluetooth, cruise control or power mirrors. I expect to get another 70000 miles and 5 years out of it at a minimum.

Those cars are out there, but you have to look for them—dealers don’t go out of their way to advertise them because they sell themselves within a couple days of hitting the lot.

New cars and newer used cars are nuts.

[GenThePerservering]

44. You guys are driving some shiny new(ish) cars!

mine is a 1997 Subaru Stationwagon. I live in the land of old cars (Pac NW).

As said above, lot of carmakers are only making those big slogwagons. Similar to houses - they just want to build McMansions. That's not necessarily what people need or want.

[SYFROYH]

51. Just bought a Subaru CrossTrek for my 18-year old.

I told him he needs to take care of it because it will be his car when he is 30.

[Starry Messenger]

52. That's why I'm hanging on to my 2001 Ford Ranger

I’ll drive it until it no longer passes smog testing. I looked at cars in 2019 and realized the market had greatly changed in 15 years, when I bought the truck used in 2004. I was so broke then could barely afford the $7k but it is paid for now.

[hunter]

53. Buying a new car on credit was one of the more idiotic things I did as a young adult.

But I was young and hot and I deserved it! Five years to pay it off? No problem. I was now a young professional!

About a year and a half later I was a newlywed, my wife had started graduate school in the Midwest and I was having to chose between paying the gas bill to keep the house from freezing or making my car payment. It actually didn't turn out too badly, we lived in a state where the utility companies aren't allowed to turn off the heat in the winter, but I sure as hell could have done without that kind of stress.

It was the first and last time I ever bought a new car, and not something I'll do a gain.