Young people are broke. While it may seem like an old trope at this point, there are also data to prove this. Many are so broke that they’ve fallen behind on their car payments, according to a study done by car insurance app Jerry, which shows that Gen Z and Millenials fell behind on $20 billion in car loans in 2022.
Everything associated with car ownership is getting more expensive. From the vehicles themselves to rising insurance rates. Inflation hasn’t made things any easier. Because of these factors, the car-buying frenzy during the pandemic reared its head in 2022. Serious auto loan delinquencies — which are defined as having a loan that’s 90 days or more late — piled up to the tune of some $20 billion then. Broken down by generation it gets worse.
At the end of 2022, 90-day delinquencies for people aged 18-29 hit a five-year high; it was slightly worse for millennials aged 30-39 whose delinquencies hit their highest level since 2019. What’s even worse is the debt has piled on at its fastest level in over 20 years. The total dollar value of auto loans taken out by Gen Z rose $50 billion in ‘22; for millennials, it rose $80 billion.
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Even more troubling is the amount of people willing to live on the financial edge, or let other bills go to be able to afford their car payment. Four in ten Gen Zers say that they use more than 15 percent of their after-tax income on their auto payment, according to Jerry; one in five say its more than 20 percent. For millennials it’s about the same, with more than a third using more than 15 percent of their after-tax income. Over 16 percent more than that use more than 20 percent of their after-tax income on auto payments. Over 50 percent of zoomers said that their car payment caused them to go more than 30 days late on another monthly debt; 33 percent of millennials say they were forced to do the same.
You can draw a few conclusions from all this. The main takeaway is that there are a lot of millennials and Gen Zers who are definitely financially illiterate. Second, pandemic car buying has caught up with a lot of people. If any of this data is any indication of auto loans as a whole, an auto loan crisis could be closer than we think.