Auto Repossessions Surge 23% in 2024, Reaching 15-Year High

U.S. auto repossessions have surged by 23% in the first half of 2024 compared to the previous year, with approximately 1.73 million vehicles seized by lenders, marking the highest level since the 2008 financial crisis. This significant increase, highlighted by a recent Wall Street Journal tweet observing "Repo Men" busier than ever, underscores growing financial distress among American consumers. The volume of repossessions now stands 14% higher than pre-pandemic levels, according to data from Cox Automotive.

The primary drivers behind this sharp uptick include elevated interest rates, persistent inflation, and historically high vehicle prices. The average interest rate for new-vehicle loans reached 7.3% in Q2 2024, with average monthly payments for new cars hitting a record $740. This economic pressure has disproportionately affected subprime borrowers, with 5.62% of this group at least 60 days late on payments as of June 2024.

Lenders, who adopted more lenient policies during the pandemic, have now tightened their standards, contributing to the rise in seizures. Many consumers who purchased vehicles between 2021 and 2023 faced inflated prices and higher interest rates, leading to increased loan delinquencies. The Consumer Financial Protection Bureau (CFPB) and Fitch Ratings have both noted the growing struggles of borrowers to manage their auto loan obligations.

The surge in repossessions reflects a broader fragility in household budgets, as individuals increasingly face difficult choices between essential expenses like housing and car payments. While the market is experiencing an influx of repossessed vehicles, which could impact used car prices, analysts project that repossession volumes may stabilize or slightly decrease in 2025, assuming no further economic downturns.