More vehicles were eligible for repossession at the end of 2022 than they were pre-pandemic, and the balances that consumers owed—even after redemption sales—was higher than pre-pandemic levels, according to recent research from the Consumer Financial Protection Bureau (CFPB).
Outstanding loans eligible for repossession in December 2022 represented 0.75% of all outstanding balances, a 22.5% increase from the December 2019 level, according to "Repossession in Auto Finance," the CFPB's inaugural report on the $1.6 trillion auto loan market.
The data examines more 100 million active auto finance accounts, and $63 billion in new monthly originations, as of April 2024, said the CFPB, citing its own data and that of the Federal Reserve Bank of New York. The findings are based on data from nine banks, finance companies and captive lenders, the CFPB said.
"All of these attributes of repossession have potential impacts on consumer risk," the CFPB concluded, adding that the new research helps gain a fuller understanding of the repossession, and assess potential risks.
In November 2022, consumers redeemed 30% of loans that previously fell into repossession, down from 34% seen in December 2021, but still higher than the pre-pandemic rate of 25% in December 2019, according to the CFPB.
The CFPB also examined average deficiency balances, which represent the amounts borrowers owe after a lender sells a repossessed car. On a non-inflation adjusted basis, the CFPB reported that the average deficiency balance was $11,340 in December 2022, which represents a roughly 42.2% increase from the $7,971 balance in December 2021. It was about 5.5% higher than the pre-pandemic average balance of $10,747 in December 2019.
