Ford CFO John Lawler flags increase in car loan delinquencies

The next warning that the US economy is headed for a potential recession could be an increase in vehicle loan delinquencies, or late payments.

Delinquencies are starting to rise, said Ford Chief Financial Officer John Lawler on Wednesday at the Deutsche Bank 2022 Global Automotive Conference.

Because they were so low at the end of last year and in the beginning of this year, it is not currently a problem for us. We appear to be moving closer to the mean again.

According to Edmunds, a company that does automotive data, consumers' average monthly car loan payments in May reached a record high of $546 for used cars and $656 for new cars.

The average loan duration for a used car reached a record-high of 70.8 months, and the average annual percentage rate for new cars reached 5.1 percent, the highest level since March 2020.

As the Federal Reserve raises interest rates to combat soaring inflation, those borrowing costs are anticipated to increase much further.

The Fed announced an aggressive path of rate rises for the balance of the year on Wednesday, raising rates by 75 basis points for the first time in in three decades.

Following the Fed's two-day meeting, new economic forecasts showed that decision-makers anticipate interest rates to reach 3.4 percent by the end of 2022, which would be the highest level since 2008.