Auto Delinquencies Climb As Lower-Income Americans Struggle With Car Payments

On the Dash:

• Over 6% of subprime auto loans are now more than 60 days delinquent, the highest on record.
• Vehicle repossessions surged to 1.73 million last year, the most since 2009.
• Automakers and lenders are tightening credit but still facing affordability pressures as monthly payments rise.

Delinquency rates on subprime auto loans have reached record highs, signaling growing financial strain among lower-income Americans as vehicle prices and borrowing costs remain elevated. According to Fitch Ratings, more than 6% of subprime auto loans are now at least 60 days past due, the highest rate ever recorded, as tighter household budgets, slowing wage growth, and unemployment edge higher.

Affordability remains a central challenge in the U.S. auto market. J.D. Power reported that nearly 14% of new-car buyers in September had credit scores below 650, the highest share since 2016. Meanwhile, average monthly car payments now exceed $750, with nearly one in five loans and leases topping $1,000. Many buyers are stretching loan terms or turning to used vehicles as manufacturers continue to prioritize high-margin trucks and SUVs over lower-cost models.

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Repossession activity has also intensified. Cox Automotive estimates that 1.73 million vehicles were repossessed last year, the highest total since 2009. While delinquencies have stabilized in recent months, they remain well above pre-pandemic levels as borrowers took on higher-priced vehicles and loans during the pandemic when credit was easier to obtain and government relief payments boosted purchasing power.

Automakers and lenders are responding cautiously. GM Financial reported that about 12% of its loans this year went to customers with FICO scores below 620. Ford, meanwhile, recently began offering lower interest rates to buyers with weaker credit in an effort to move unsold F-150 pickups.

Despite rising delinquencies, investor demand for securities backed by subprime auto loans remains steady, suggesting confidence that stricter lending standards will prevent a broader financial fallout.