106 Iowa L. Rev. 2215 (2021)

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Abstract

Before the COVID-19 pandemic, auto loans outstanding in the United States had soared to record highs. The boom in lending spanned new and used cars and traditional and subprime loans. With loan delinquencies also hitting new highs almost every quarter, predictions that the auto lending market could burst soon abounded. When the economy came to a grinding halt and unemployment skyrocketed in the wake of the pandemic, auto lenders knew they were facing a crisis. Throughout 2020, auto lenders granted more payment forbearances to consumers, while slashing interest rates on new loans. Auto manufacturers similarly made promises to buyers, such as the ability to return new cars for up to a year upon job loss. Combined with the CARES Act’s relief rebates and moratoria, the bottom did not fall out of the auto loan market.

These measures, however, are temporary. The pandemic alone will not reduce people’s need for cars, but it will burst the auto loan bubble. The economic fallout will require interventions in the auto sale and loan markets, which presents a moment to transform America’s car economy. This symposium Essay details a range of financial and related measures that can be implemented in the near future to shift auto financing away from promoting economically unequal and environmentally unfriendly use and access to automobiles, and, more broadly, to shift the United States away from prioritizing automobiles as the primary means of personal transportation.