Defense and Compliance Attorneys
Rising late auto loan payments show that many low-income and subprime borrowers are under growing financial strain, even though the overall auto loan market is not yet in full-blown crisis.
What is happening
-
Auto loan delinquencies have climbed to their highest levels in over a decade, with about 3.8% of balances at least 30 days past due in mid‑2024 and 5.0% at least 90 days late by Q2 2025.
-
Among subprime borrowers, roughly 6.4–6.6% are 60 days or more late and about 15–16% are 30 days late, both series records in data going back more than two decades.
Why low‑income families are hit hardest
-
Lower‑income and subprime households have significantly higher delinquency rates, and in some datasets their rates are at or near record highs, even as middle‑ and higher‑income borrowers have only recently started to deteriorate.
-
These borrowers are more likely to have taken out larger loans on used cars at inflated pandemic‑era prices and higher interest rates, so car payments, insurance, fuel, and repairs now consume a bigger share of already thin budgets.
Key drivers of rising late payments
-
Vehicle prices remain near record highs and average monthly car payments have jumped roughly 25–30% since 2020, pushing typical payments toward or above the 600‑dollar range.
-
Elevated interest rates, inflation in essentials (like food and rent), and higher insurance premiums mean more families must choose which bills to pay first, making it harder to keep car loans current.
Effects and why it matters
-
Because most U.S. workers rely on cars to reach their jobs, missed car payments and repossessions can quickly spiral into job loss, further income declines, and even bankruptcies, especially for low‑income households.
-
Analysts note that auto loans usually sit near the top of household payment priorities, so rising delinquencies there are an early warning sign of broader consumer stress, not just an isolated issue in one credit market.
Snapshot: subprime vs overall auto loans
| Group / metric (recent) | Delinquency level (approx.) | Notes |
|---|---|---|
| Overall auto loans, 30+ days | 3.8–4.0% of balances | Highest since around 2010. |
| Overall auto loans, 90+ days | 5.0% of balances | Up about 13% from a year earlier. |
| Subprime, 60+ days late | 6.4–6.6% of loans | Roughly double 2021 levels. |
| Subprime, 30+ days late | About 15.8% of loans | Highest since data began in 2000. |
Lower‑income and “subprime” households are the most affected by auto loan delinquencies, although signs of strain are now visible across nearly all income tiers.
Most affected income and credit groups
-
Studies from credit bureaus and the New York Fed show that delinquency rates are highest in lower‑income areas and among borrowers with weaker credit scores, especially subprime borrowers.
-
One recent analysis finds that lower‑income consumers have led year‑over‑year increases in loans that are 60 days or more past due, while higher‑income groups have seen much smaller increases or relatively stable performance.
How higher‑income borrowers compare
-
Prime and higher‑income borrowers are now also missing payments more often than a few years ago, but their delinquency rates remain well below those of low‑income and subprime borrowers.
-
Analysts describe a “K‑shaped” pattern in which the top 10–20% of earners maintain strong spending and relatively healthy credit performance, while lower‑income groups face rising delinquencies and tighter budgets.
Summary by group
| Group | Relative delinquency impact | Notes |
|---|---|---|
| Low‑income, subprime credit | Highest, record or near‑record rates | Driving most of the increase in serious delinquencies. |
| Middle‑income, near‑prime | Moderate, rising | More borrowers starting to fall behind but still below subprime levels. |
| Higher‑income, prime credit | Lowest, mostly stable | Some uptick, but much less affected than lower‑income groups. |
Upcoming Events
Defense and Compliance Attorneys