Subprime Auto Loan Delinquency Is Only Getting Worse

Subprime auto loan delinquencies are worsening in 2025, with the rate of borrowers at least 60 days late on payments reaching a record 6.65% in October—the highest level ever recorded by Fitch Ratings, surpassing anything seen since tracking began in the early 1990s. This elevated delinquency rate highlights increasing financial pressure among the riskiest borrowers, even as broader economic indicators remain relatively stable.​

Key Drivers

Multiple factors contribute to the spike in subprime auto loan delinquencies:

• Rising Car Prices and Loan Amounts: Since 2020, the average size of auto loans—especially for subprime borrowers—has increased markedly, inflating monthly payments beyond what many can afford.​

• Higher Interest Rates and Borrowing Costs: Not only are the principal amounts larger, but higher interest rates have pushed monthly payments up even further for subprime consumers.​

• Stagnant Wages and Economic Strain: Many lower-income borrowers face tighter household budgets as costs for essentials rise but wage growth slows, leaving less flexibility to cover high car payments.​

• Pandemic-Era Lax Lending Standards: Auto lenders loosened credit standards during the pandemic, particularly for subprime borrowers, resulting in more high-risk loans that are now going bad.​

Broader Impacts and Trends

• Vehicle Repossessions: High delinquency rates are translating to a surge in car repossessions, with 1.73 million vehicles repossessed last year, the most since the Great Recession.​

• Affordability Pressures: Many subprime borrowers now owe more on their vehicles than the vehicles are worth, leading to tough choices about which bills to pay and which to miss.​

• No Spillover Yet to Prime Borrowers: Prime borrowers remain largely unaffected, with their delinquency rate below 0.5%, indicating the current stress is concentrated in the riskiest segment of the market.​

Market and Policy Reactions

• Tightening Credit: Lenders are beginning to restrict new auto loans, especially for lower-credit applicants, in response to climbing losses and delinquencies.​

• Wider Economic Signals: Economists consider the rise in auto loan delinquencies a warning sign, as defaults on car loans—a necessity for most American families—typically lag behind, not lead, other forms of financial distress.​

In summary, subprime auto loan delinquency is rising rapidly, driven by larger and costlier loans, economic pressure on lower-income households, and the aftershocks of loose lending policies during the pandemic. This issue is fast emerging as a broader economic risk as consumer financial stress becomes more apparent across the U.S. auto market.​