Record-breaking debts weigh heavily on Americans underwater with their car loans, while repossessions surge to levels unseen since the financial crash of 2009.
These developments signal deeper issues rather than root causes. Among the most alarming indicators is the spike in auto loan delinquency rates, currently at a 15-year peak for borrowers overdue by 30, 60, or more days, as revealed by latest TransUnion data combined with MorningStar’s April analysis. Other sources confirm this upward trajectory across all delinquency brackets—from one month to several months late.
As anticipated, consumers with shaky credit scores bear the brunt: subprime auto loans delinquent by at least 60 days have climbed to nearly 6%, marking the highest since Fitch Ratings began tracking in 1993.
So what’s behind these record-breaking delinquencies, and how might stability return to the auto lending arena?
Current Delinquency Patterns in Focus
Delinquency is swelling across the board—touching borrowers regardless of credit rating, income bracket, or age, and cutting across lenders of every stripe who finance these overdue loans.
1. The Credit Score-Delinquency Link
Consumers with credit scores below 600 are predictably the most prone to falling behind on payments. Intriguingly, TransUnion’s numbers reveal worrying trends even among those boasting healthier credit histories.
Mortgage delinquencies have steadied near pre-pandemic figures, yet auto loan delinquencies continue to hover at elevated levels, affecting a wide spectrum of credit scores and income groups alike.
— Wilbert van der Klaauw, economic research advisor, New York Fed
2. Lending Sources and Default Rates
Captive lenders—the financing branches owned by automakers—usually cater to buyers with stronger credit, occasionally sweetening deals with incentives. Yet their delinquency rates stubbornly exceed pre-COVID-19 benchmarks.
Conversely, borrowers with less stellar credit often turn to non-captive lenders to finance used or new rides, explaining why delinquency rates in this segment are climbing fastest, now surpassing pre-pandemic levels.
3. Income’s Role in Falling Behind
Predictably, low-income buyers face higher delinquency risks, but surprisingly, those in higher earning brackets are also slipping behind on payments at an accelerating pace.
4. Age Demographics and Late Payments
Serious delinquencies—loans overdue by more than three months—are rising among all age groups. Although borrowers in their 20s are over twice as likely as seniors to fall behind, upward trends are apparent across the generational spectrum.
Note: According to TransUnion data, auto loan delinquency rates for borrowers aged 18-29 increased by 18% from 2022 to 2024, while those aged 50+ experienced a 7% rise over the same period.
Root Causes Behind Rising Auto Loan Troubles
Industry experts and recent studies point to four main forces driving the surge:
1. Soaring Vehicle Prices
| New Cars | $36,246 | $42,023 | Your money now buys less on dealership lots and private sales. |
| Used Cars | $22,444 | $26,135 | Higher price tags drive monthly payments up, straining budgets. |
“Back in 2017, carmakers axed most models under $25,000 and started focusing on vehicles priced at $60,000 or more. Simultaneously, they targeted wealthier buyers with better credit,” explains Sean Tucker, Kelley Blue Book’s lead editor. “This strategy left a sizeable chunk of the market underserved. People wanting affordable cars often ended up buying pricier models simply because the cheaper options disappeared.”
2. Escalating Interest Rates
| New | 8.5% | 11.8% | Monthly interest obligations soar, increasing total cost of borrowing. |
| Used | 4.3% | 6.5% | Rising rates compound financial stress for borrowers already stretched thin. |
Anthony Tran, assistant VP of North American Financial Institution Ratings, notes, “The uptick in delinquencies over the past year hints that despite solid job markets, many consumers feel squeezed by inflation and elevated interest rates on revolving debt like credit cards.”
3. Inflated Monthly Payments
Since late 2019, monthly payments have surged by over 30%, outpacing inflation, which rose roughly 23%, per TransUnion.
Melinda Zabritski, Experian’s automotive insights chief, observes, “If your prior monthly bill was around $450-$500 a few years ago, it’s now nudged up to about $740. This jump naturally spills over into higher delinquency rates.”
4. Auxiliary Inflationary Burdens
Fuel prices have climbed roughly 20% since pre-pandemic days, according to recent government statistics.
| Insurance | 6.4% | 55.3% |
| Auto Repairs | 7.6% | 56.8% |
Jonathan Smoke, chief economist at Cox Automotive, reminds us that wage growth hasn’t matched these soaring ownership expenses. “Many folks took out loans when prices peaked in 2022-2023, but inflation kept accelerating faster than income growth, squeezing budgets over the last two and a half years,” he explains.
Smart Moves to Dodge Auto Loan Delinquency
- Keep communication lines open with your lender. If you sense trouble ahead, reaching out early might help prevent repossession. Some lenders may allow payment deferrals or term modifications to ease your burden, though availability varies.
- Explore refinancing options. Restructuring your loan with a lower interest rate or extended term could reduce monthly payments and lessen credit damage risk.
Staying proactive and informed is key to navigating these choppy financial waters without falling behind.