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CBS News
2 days ago
- Business
- CBS News
Even households earning $150,000 a year are struggling with credit card and car payments
More high-income Americans around the U.S. are falling behind on their credit cards and auto loans, a sign that even people earning more than six figures are more likely to struggle financially amid shifts in the economy. Delinquencies across all loan products for households earning more than $150,000 have more than doubled since 2023. That compares with a 60% increase in delinquencies during that time for households earning between $45,000 and $150,000, and a 22% increase for people earning less than $45,000, according to data from credit-scoring company VantageScore. High-income households had weathered the post-pandemic years better than lower-earning Americans because they had more of a cushion to absorb soaring inflation and other shocks, according to VantageScore chief economist Rikard Bandebo. But these Americans are now feeling the impact of several economic changes, including a weaker job market for white-collar workers and higher housing costs, he told CBS MoneyWatch. "For white-collar workers, it's probably tougher than it has been," Bandebo said. "This trend has been consistent and seems to be continuing — it's not abetting." About 38% of all new jobs created in the five years before the pandemic paid above-average wages, VantageScore's data shows. But this year that share has fallen to 7%, signaling that companies are creating fewer white-collar positions. That poses a challenge to higher-income Americans who suffer a job loss because it may be tougher to find new employment than in previous years. "This group is being hit from a number of different aspects, which is making it harder for them to make ends meet," Bandebo said. To be sure, the overall rate of loan delinquencies in the U.S. remains higher for low- and middle-income consumers than for high-income earners, according to VantageScore. For instance, the delinquency rate for households earning at least $150,000 now stands at about 0.34%, versus 1.75% for low-income households. But the rise in delinquencies has accelerated faster for higher-income households than for other groups, the firm's data shows. A key question for the U.S. is whether the financial challenges facing high-income Americans could portend a broader economic downturn. Notably, consumption by wealthier Americans now contributes about half of all consumer spending, the main engine for economic growth. By comparison, in 1990 spending by Americans higher up the economic ladder accounted for about one-third of all spending. At the same time, low- and middle-income households are also facing stiffer financial headwinds with about three-quarters of middle-income consumers saying they're cutting back on non-essential purchases, according to a recent survey from financial services company Primerica. About one-third of middle-income households, or those earning between $30,000 to $130,000, say they've increased their credit card usage in the past year, the survey found. Retailers and major consumer brands have also been warning that some consumers are cutting back or are more cautious in their purchases. Shoppers are "looking for value, either in smaller packs and promotions or in larger pack sizes in the club channel and online," Procter & Gamble Chief Financial Officer Andre Schulten said on an earnings conference call Tuesday. "That's the behavior we've been outlined before, but it's not stopped. It continued." Widespread consumer frustration with high prices is thought to have boosted President Trump during the 2024 electoral campaign against Joe Biden, when Mr. Trump vowed to end the "inflation nightmare." So far, inflation has remained relatively muted in 2025, although June's 2.7% annualized rate remains higher than the Federal Reserve's goal of reaching a 2% rate. Yet more consumers are now expressing frustration with the Trump administration's economic policies, according to a new CBS News poll that found nearly 64% of Americans now disapprove of how the president is handling inflation. The survey was conducted from July 16-18 and polled 2,343 adults. As for Americans who are struggling to keep up with credit-card debt and auto loans, they aren't likely to see relief anytime soon. Although Mr. Trump has been pushing Federal Reserve Chair Jerome Powell to lower interest rates, economists think the central bank is very likely to stand pat when officials announce their latest policy move on Wednesday.
Bloomberg
23-07-2025
- Automotive
- Bloomberg
The High Costs of Trump's ‘Big Beautiful' New Car Loan Deduction
On July 4, US President Donald Trump signed the $3.4 trillion fiscal package that is a cornerstone of his legislative agenda. The sweeping 'One Big Beautiful Bill Act' contains a plethora of tax cuts that largely benefit the wealthiest Americans while ramping up border security, nixing clean energy subsidies and slashing Medicaid. Within the 330 pages of this megabill is a provision presented as aid to the $1.6 trillion US auto industry. For the first time, Americans will be able to deduct interest payments on new car loans when calculating their taxes.
Bloomberg
18-07-2025
- Business
- Bloomberg
Ally Shares Climb After Earnings, Auto Lending Top Estimates
Ally Financial Inc. shares rose after the lender reported strong consumer auto-loan originations and earnings that topped analysts' expectations. Adjusted second-quarter earnings per share were 99 cents, according to a statement Friday, compared with the 81-cent average estimate of analysts surveyed by Bloomberg. The shares jumped 4.2% at 7:55 a.m. in early New York trading.
Motor Trend
09-07-2025
- Automotive
- Motor Trend
How the One Big Beautiful Bill Will Affect Car Buying and Ownership
On July 4, President Trump signed the 'One Big Beautiful Bill' Act into law. The budget reconciliation bill made big changes to federal spending, taxes, and regulation, some of which will have big effects on car owners, enthusiasts, and the automotive industry. We've read through the 879-page bill and outlined the parts that'll affect your next car purchase, the price of gas, and your commute. The "One Big Beautiful Bill" affects car buying by altering tax deductions on auto loans, ending EV tax credits, reducing CAFE penalties to zero, and cutting grants for clean vehicles. It also impacts gas and power prices by changing drilling and energy policies. This summary was generated by AI using content from this MotorTrend article Read Next Because this is a reconciliation bill, which modifies existing budget legislation rather than starting from scratch, there are limits to what can be included in the legislation. Everything in the bill has to be directly related to government spending and taxation, so some of the changes are creatively written in order to make the cut. (As always, please consult your tax professional before making financial decisions. The below is provided for information purposes only and is not tax or financial advice.) 'No' Tax on Car Loan Interest This one is confusing, and 'no' is in quotation marks because it's misleading. Car buyers looking to finance their next purchase may be able to write off some—but not all—of the interest charged on the loan each calendar year on their taxes. That's not the same as abolishing or suspending the tax altogether, as the claim implies. There are also a number of rules for qualifying which will cut off a lot of buyers. First and foremost, the vehicle you're buying has to be assembled in the U.S. That will be confusing for some buyers, because some of the bestselling vehicles in the U.S, such as the Toyota RAV4 and Chevrolet Silverado, are built in multiple plants, not all of them in the U.S. The IRS will know where your vehicle is made because you have to supply the VIN when claiming the tax deduction, and that number includes a digit that represents the country of origin. The tax deduction doesn't apply to leases, either, only purchases. It appears to apply to both new and used vehicle purchases, as the legislation makes no distinction. Vehicles with salvage titles and parts cars don't count, either. Similarly, it doesn't apply to anything with a gross vehicle weight rating over 14,000 pounds (which is the rating of a Ford F-350, as an example). Commercial vehicles qualify but only if they're for personal use, not business use. Business fleet purchases don't qualify, so be careful if you're planning to register your vehicle to your small business in order to take advantage of other tax incentives. If your purchase qualifies, there are still more rules. The tax deduction is capped at $10,000 per calendar year, so if you pay more than that in interest, the balance will still be taxed. If you make more than $100,000 per year as an individual or $200,000 per year as a joint filer (married or similar), the amount of interest you're able to deduct goes down by $200 for every $1,000 of income you earn over $100,000 (individual, or $200,000 combined). Do the math and it means no tax credit for anyone making over $150,000 individually or $250,000 combined. Finally, the tax credit is only available for a limited time. You can't start counting interest payments towards a deduction until January 1, 2026, so the rest of this year doesn't count. The tax credit will expire on December 31, 2029 unless Congress extends it. EV Tax Credits End September 30 The (up to) $7,500 federal tax credit for new and used EVs now expires on September 30 of this year. Previously, both tax credits were scheduled to expire on December 31, 2032. Likewise, the tax credit for commercial EVs expires the same day. State tax credits are not affected. On a related note, the federal tax credit for installing an EV charger or renewable fuel dispenser at your home or business will expire even sooner, on July 30 of this year. Tax credits have been a huge driver of EV sales to date, so the end of them could cause final vehicle sale prices to rise and sales to plummet. A large drop in sales could lead automakers to discontinue some or all of their EVs, reducing choice in the market. Lower cost EVs with smaller profit margins would be vulnerable, which could lead to only more expensive EVs on the market. Less Help With Bad Auto Loans Stopping predatory auto loans had been a major focus for the Consumer Financial Protection Bureau during the Biden administration, but enforcement is likely to drop off substantially after the passage of this bill. Funding for the bureau is cut by 54 percent, which will drastically reduce the number of investigations and actions it's able to execute. No Penalties for CAFE Violations Because this is a reconciliation bill, Congress could not make changes to vehicle emissions and fuel economy laws. Rather than replace or abolish the Corporate Average Fuel Economy program (CAFE), this bill keeps all the existing rules in place but reduces the penalties for breaking them to $0.00. This means automakers are free to ignore federal fuel economy regulations as the EPA cannot meaningfully enforce them. This could potentially affect consumers in multiple ways. If automakers stop following CAFE rules, fuel economy could go down and emissions could go up. Any savings on R&D could then be passed on to the consumer. This is unlikely, however. Automakers plan as much as a decade in advance, so vehicles for sale today were engineered years ago and the money already spent. Future iterations of Congress and future presidents could also reinstate the penalties in a few years, which would wipe out any savings and put automakers behind on R&D. Fuel economy regulations elsewhere in the world aren't changing, so there's little incentive for automakers to cut R&D spending regardless, meaning no reduction in pricing is likely. No More Money for Clean Commercial Vehicles Businesses and local governments around the country have taken advantage of federal grants to help offset the cost of replacing older heavy duty commercial vehicles with EVs. These grants were commonly used to replace old, diesel school busses with new, electric versions and also covered installation of chargers and training employees to work on those vehicles and chargers. Any grant money not already spent has been taken away. Similarly, grants for reducing diesel exhaust emissions in low income and disadvantaged areas have been cut, with all unspent money withdrawn. Funding has also been cut for an EPA program which studies the health and environmental effects of fuel additives. Reduction in Tax Credits for Commuters If your employer provides a transit passes, vanpool reimbursement, parking passes, or a bicycle commuting reimbursement, the amount you're able to deduct on your taxes is going down. Previously, you could deduct up to $175 per month each for your vanpool, transit pass, or parking pass. Now, you can only deduct up to $175 total per month for any combination of those services. The deduction for bicycle commuting has been eliminated entirely. No More Money or Credits For Home Solar and Battery Backups This is tangential to car buying and ownership, but if you were planning to take advantage of tax credits to install solar panels and battery backups in your home to offset the cost of charging an EV, you're out of luck. Any money not already spent on those grants and tax credits has been rescinded. Likewise, the business tax credit for building specifically energy efficient new homes has been cut, along with business tax credits for training contractors to install solar panels, batteries, and more efficient appliances. Gas and Power Prices Could Be Affected Portions of the bill addressing oil drilling and the Strategic Petroleum Reserve may have a small impact on gas prices in the future. Various provisions restart new oil and gas drilling leases both in the U.S. and offshore in its oceans, which would eventually add to the global oil supply and potentially push down prices. However, it will take years for any new leases to be acquired, explored, drilled, and turned into production wells, and oil companies are already sitting on a large number of unexplored leases. Because oil is a globally traded commodity, adding more supply doesn't necessarily change the price of a barrel of oil, nor the price of a gallon of gas. The bill also requires the government to abandon a plan introduced during Trump's first term to sell down part of the Strategic Petroleum Reserve. Instead, it requires the government to buy more oil it can store for future emergencies. Presidents like to draw on the Strategic Petroleum Reserve during times of high gas prices, but the quantities withdrawn are typically so small they have little to no impact on lowering the price at the pump. With regard to electricity generation, the bill paves the way to reopen old, closed power plants and cuts tax credits for wind and solar farms. Old power plants will now be able to reopen without any retrofitting of modern pollution controls, which could make them economically viable, although it depends on the individual plant. New wind and solar farms now have a shorter window to begin operations before the tax credits are cut off, and the lack of credits is expected to make new such farms economically unviable in the future. Fewer wind and solar farms means energy prices are less likely to go down or remain flat, while old power plants coming back online could partially offset their absence at the cost of greater air pollution in those communities. The bill also undoes several provisions of the Inflation Reduction Act, which provided loans and grants for electrical infrastructure improvements nationally, including transmission line improvements in particular, as well as integrating offshore wind farms into the power grid and improving electrical infrastructure on tribal land. Any reductions in electricity prices or increases in reliability these improvements may have provided are off the table. Similarly, by cutting the clean hydrogen production credit several years earlier than planned, the bill will likely slow or halt the adoption of clean sources of hydrogen and slow or stall the nascent hydrogen vehicle industry, both for private and commercial vehicles. Most hydrogen today is produced from gas and oil, which is both cheaper and dirtier than clean alternatives.
Auto Blog
07-07-2025
- Automotive
- Auto Blog
The Rise of 84-Month Car Loans: Why Buyers Are Trapped
By signing up I agree to the Terms of Use and acknowledge that I have read the Privacy Policy . You may unsubscribe from email communication at anytime. New cars are expensive, and it hurts Regardless of whether you've nervously scrolled through endless listings on dealer websites or wasted hours of your life configuring your dream cars online, it hurts to know that new cars are expensive. According to analysts from Kelley Blue Book and Cox Automotive, dealers are doing the most they can to keep car prices steady; however, the average new car in the U.S. still costs a whopping $48,799 in May 2025, a 2.1% increase from the same month in 2024. 0:05 / 0:09 Costco members can save $3,000 on a new Chevy Corvette Watch More Although data shows that tariffs have influenced some buyers in the U.S. to defer or delay their buying decisions, other buyers must finance their cars, which keeps a disturbing trend alive among new car buyers. BMW vehicles are displayed for sale on a lot at the BMW of South Austin dealership — Source:More drivers are taking out longer loans with higher interest, says Edmunds According to new data released by car buying authority Edmunds, Americans' auto loans are reaching a point where Dave Ramsay and Caleb Hammer would declare a personal finance armageddon. While automakers and dealer groups would advertise their single-digit promotional financing rates as terms that extend over 60 months (5 years) or 72 months (6 years), buyers are stretching their payment plans for much longer. Edmunds reports that in Q2 2025, more buyers than ever are taking out loans over the course of 84 months (7 years), making up about 22.4% of new-vehicle financing in the quarter, up from 20.4% in Q1 2025 and 17.6% during the same period last year. Though buyers are willing to stretch and spread out their loan terms for a lower monthly payment, they aren't being spared from paying out the wazoo every month. According to Edmunds, over 19.3% of new car buyers had monthly payments that exceeded $1,000 in Q2 2025, a notable increase from the 17.7% in the previous quarter. As more buyers opt for extended loan terms, Edmunds' consumer insights analyst Joseph Yoon warns that this could have later consequences, especially as the risks and tribulations of car ownership, such as upkeep costs and depreciation, kick in. 'While extended loan terms may make a monthly payment more palatable, consumers need to keep in mind the risks associated with a loan extended that far into the future, including increased costs for upkeep down the line and the risk of being underwater on the loan if the car is traded in before it's paid off,' Yoon said. 'If payments on a more standard 60- or 72-month loan don't fit your budget, you might consider leasing. While you won't be building equity in your vehicle the way you do with a purchase, leases afford time to get your finances in better shape with lower monthly payments in the meantime.' Autoblog Newsletter Autoblog brings you car news; expert reviews and exciting pictures and video. Research and compare vehicles, too. Sign up or sign in with Google Facebook Microsoft Apple By signing up I agree to the Terms of Use and acknowledge that I have read the Privacy Policy . You may unsubscribe from email communication at anytime. APRs remain high, but buyers are putting less money down Although ads on TV during select promotional periods, like certain federal holidays, show that your local [insert automotive brand here] dealer is offering 0% APR loans, or a number close to it (such as 0.9%) on a specific model, these kinds of rates are far out of reach for the average new car buyer. Edmunds says that the average buyer financed their cars at an annual percentage rate (APR) of 7.2%. However, this doesn't mean that 0% finance deals don't exist; in fact, they accounted for 0.9% of new-vehicle loans in Q2 2025. This was the lowest share Edmunds recorded since 2004, down from 1% in Q1 2025 and 2.9% in Q2 2024. BMW vehicles are displayed for sale on a lot at the BMW of South Austin dealership — Source: Getty Images However, while it is commonly known that a sizable down payment is required to achieve manageable monthly payments, in addition to accepting longer loan terms, Edmunds found that buyers are putting less money down on their new car loans than ever before. According to their data, the average down payment that buyers put down on their new-car loans was $6,433 in Q2 2025, which is down from $6,511 during the previous quarter and $6,579 during the same time last year. At the same time, Edmunds found that new car buyers are financing increasingly expensive vehicles. They found that the average amount financed for new cars climbed to an all-time high of $42,388 in Q2 2025, up from $41,473 during the last quarter and $40,873 during the same time last year. Final thoughts In a statement, Ivan Drury, Edmunds' director of insights, noted that while it would be easy to assume and point fingers at the Trump administration's tariffs, car prices remain steady at a level that car buyers still can't afford. 'It's clear that buyers are pulling the few levers they can control to manage affordability, whether that's by taking on longer loans, financing more, or putting less money down — even if some of those decisions increase their total costs,' Drury said. 'Consumers are continuously stretching to afford new vehicles in this market, and while tariffs haven't directly driven these Q2 numbers, they're certainly not going to make things any easier for shoppers moving forward.' 2025 Ram Power Wagon — Source: Ram We are seeing automakers react to the reality of extended loan payments, too. In fact, the Stellantis-backed Ram Trucks began to offer a best-in-class 10-year/100,000-mile powertrain warranty, which gives Ford and Chevy something to think about. However, in its press release, Ram acknowledges that the warranty comes as 'more buyers opt for extended loan terms.' 'Everything is more expensive, and trucks are certainly no exception. Truck buyers are financing purchases for longer periods of time, with nearly 80% of new truck loans exceeding five years,' Ram Trucks CEO Tim Kuniskis said in a statement. It is one thing for automakers to recognize this reality, but it is another to enable it. This data comes at the same time when auto loan delinquency is at its highest, as 1.4% of auto borrowers were at least 60 days behind on their auto loan payments during the first quarter of 2025, per TransUnion. About the Author James Ochoa View Profile
