Recent figures from Fitch Ratings show auto loan delinquencies hit a high water mark last month.
The agency found some 6.1 percent of subprime borrowers — who typically have lower credit scores and face higher interest rates — were more than 60 days past due on their auto loans.
That tops the previous high from October 1996, when the 60-day delinquency among that group of borrowers rose to roughly 6 percent.
Bill Gross, a legendary investor and co-founder of Pacific Investment Management Co. (PIMCO), pointed to the jump while warning the U.S. could be headed for a recession by the year’s end.
“Regional bank carnage and recent rise in auto delinquencies to long-term historical highs indicate U.S. economy slowing significantly. Recession in 4th quarter,” Gross wrote on X, the platform formerly known as Twitter.
The increase in delinquencies coincides with an upward trend in borrowing costs for cars seen over the past two years as the Federal Reserve has repeatedly hiked interest rates to tackle high inflation.
Average interest rates for borrowers with the highest credit scores sat at 5.1 percent for new cars and 7.1 percent for used cars in the second quarter of 2023, according to an Experian report.
Those with the lowest credit scores saw average rates of 14.2 percent for new cars and 21.4 percent for used cars during the same period.
The report comes days after Fed Chairman Jerome Powell warned of a “bumpy” path forward in prepared remarks, while declining to say if another round of interest rate hikes were on the way.
“Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said in the remarks.
The Hill’s Julia Shapero has more here.
