Wave of Repossessions Coming as Subprime Auto Buyers Miss Payments

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Subprime car lenders report a sharp drop in auto loan payments.
In a sign of upcoming trouble, Subprime Car Buyers Miss Loan Payments.

Credit Acceptance Corp., the lender to car buyers with subprime credit scores, warned it’s seeing a sharp drop-off in payments as people shift their financial priorities to get through the coronavirus pandemic.

As unemployment soars, borrowers are putting off payments or “reallocating resources,” Credit Acceptance said in a regulatory filing Monday, explaining that it needs more time to publish a quarterly report. New lending is also slowing as dealerships across the U.S. are forced to shutter their lots, the company said.

Ally Financial Inc. said on Monday that about 25% of its auto-loan customers have taken advantage of its payment-deferral program.”

Forbearance Masks Problems

The filing by Credit Acceptance shows some consumers already can’t keep up.

Meanwhile, loan applications have plunged as dealers have closed their lots.