In Commerce City, Colorado, auto hauler, Tom Kingston, has been witnessing the fluctuations of the U.S. car sales market for nearly two decades. After a period where cars were selling swiftly during the COVID-19 pandemic, the market is now facing challenges with dealers struggling to move inventory. Kingston noted a notable shift from the demand boom during the pandemic, where vehicles were selling above sticker prices, to the current difficulty dealers are encountering in finding room for their unsold inventory.

The American economy heavily relies on the automotive sector, but as car sales continue to climb, so do loan delinquencies and repossessions. Experts attribute these challenges to pandemic-era buyers overpaying for vehicles, automakers offering new incentives, and lenders imposing stricter loan terms. This paradoxical situation is further fueled by an economic divide, where individuals with investments experience income growth while those without face inflation, high gas prices, and increasing interest rates.

Despite challenges in the market, automotive manufacturers are showing signs of recovery after pandemic setbacks. Last month, Ford reported a 12% increase in vehicle sales compared to the previous year, reflecting an overall upward trend in the industry. The situation is further complicated by loan delinquencies rising for an extended period, mirroring the financial strain faced by consumers.

The dilemma persists as Americans continue to purchase new vehicles, driving the average new car loan interest rate to 9%, and used car loans to 14.5%. With lenders extending loan terms, many buyers find themselves unable to pay off their vehicles before major repairs are required. The consequences of this trend are exemplified by an increase in the number of individuals defaulting on, or being delinquent in paying, their auto loans. This economic strain is further exacerbated by inflation and rising costs of essential goods and services, impacting consumers’ disposable income and overall financial stability.