saw a decrease of 12% in total repossession volumes to 1.1 million.Īt 1.98%, the loan default rate in 2021 was particularly low – far from the more historically normal level of 2.9% seen in 2019. Last year, repossession volumes at auction fell another 7%, while we estimate the U.S. That is consistent with the 24% loan default decline observed in Equifax data in 2020 and the 24% decline in estimated repossessions. In 2020, Manheim observed a 22% decline in repossession volumes at wholesale auction sites across the U.S. Therefore, due to a very low default rate and a smaller share of defaults turning into repossessions, the likely repossession rate in 2022 is currently, and will likely remain, very low by historical standards. We believe that in 2021, and continuing in 2022, a larger share of auto loans in default are not producing repossessions. Historical Repossession Volume and Auto Loan Default Rate As a result, 2021 likely saw approximately 1.1 million repos, down from an estimated 1.3 million in 2020 and 1.7 million in 2019. Default volume was near 1.5 million.Ĭox Automotive estimates that the share of defaults ending up as repossessions declined from the more typical 80% in 2020 to below 78% in 2021. Last year, the loan default rate was less than 2%, the lowest in at least 16 years. In 2020, thanks partly to loan accommodation and government stimulus, auto loan defaults dropped to 1.6 million, or 2.2% of loans. In 2019, our estimates indicate there was a decade-high 2.1 million auto loan defaults, pushing the loan default rate to 2.9% of all loans. To put current loan default and repossession volume in perspective, consider calendar year 2019, the last “normal” year before the global COVID-19 pandemic. There are many reasons for this, including situation when the lender chooses not to pursue a repossession, such as when the vehicle value or default amount may not be worth the effort or when the consumer and lender work out some other plan. Historically, the default volume is larger than the actual repo volume, as approximately 20% of auto loans in default never become a repossession. We define defaults as auto loans that are beyond 120 days past due but exclude loan accounts in bankruptcy proceedings. Working with Equifax data, Cox Automotive has also established a view of auto loan defaults to track the basis for repossessions. As the country’s largest auto auction, Manheim repossession volume trends serve as one proxy for the overall market. Unfortunately, there is no government or third-party source that officially and accurately tallies repossession volumes. In fact, the data clearly show both defaults and repos are currently well below historical averages. Fortunately, so far, that is not what we are seeing on the ground. With stressed household finances, many industry watchers are looking for a rapid increase in loan defaults and an increase in vehicle repossessions that would be of crisis proportions. While overall inflation was at a 41-year high of 9.1% year over year in June according to the CPI, the inflation rate for energy, food, and shelter was 11.7%. For example, households in the lowest income quintile spend about half of their monthly expenses on energy, food, and shelter. economy is impacting lower-income households the most, as those households are least likely to be able to absorb the higher cost of energy, food, and shelter. The higher rates are designed to cool the hot economy, and there are signs that is happening. The Fed’s aggressive stance on tackling inflation has resulted in increased borrowing rates that will likely move to 3.5% or higher by year-end. As I noted after their July meeting, the Federal Open Market Committee has moved the target rate more in the past two months than at any point since 1981, and they are not done yet.
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