CFPB: Rising car prices means more auto loan debt
February 24, 2022 / Source: CFPB
Earlier this month, the Bureau of Labor Statistics released data regarding changes to the Consumer Price Index (CPI), which is one measure of inflation. The increasing cost of automobiles continues to be a major component of inflation, as many manufacturers face difficulties procuring chips that are a key component in cars and are therefore producing fewer new cars. While the chip shortage has caused new cars to grow more expensive, the price increase of used cars has been sharper. Data show that the CPI for used cars and trucks increased 40% percent since January 2021 while the CPI for new cars increased 12 percent. As car prices continue to rise, loan amounts are rising, and loan lengths are growing to make those larger loans seem affordable. The CFPB expects both the total amount of debt and the average loan size to continue to increase and that larger car loans will put increased pressure on some consumers’ budgets for much of the next decade. They are concerned that current high auto prices, especially for used cars, might create incentives for lenders to repossess cars more quickly than would have occurred before. As such, the CFPB will be focusing on ensuring a fair, transparent, and competitive auto lending market in the following ways.
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