America’s Auto-Loan Market Signals Strain
- Buster Wurm
- 9 hours ago
- 2 min read
Delinquency rates on U.S. auto loans are climbing to historic highs, exposing growing financial stress among lower-income consumers. Subprime borrowers, those with the weakest credit profiles, are now falling behind at the fastest pace in decades. According to Fitch Ratings, the share of subprime loans at least 60 days overdue rose to 6.65% in October, the highest since 1994, aligning with earlier estimates of record-level delinquencies this year.
These missed payments reflect years of rising car prices, shrinking dealer incentives, and longer loan terms that pushed many consumers into overstretched budgets. Inflation pressures, the restart of student loan payments, and weaker hiring have intensified the challenge, leaving millions struggling to keep up with their monthly bills.
The strain is showing across the industry. Subprime borrowers accounted for 14.4% of auto-credit customers in the third quarter, the highest share since 2019, while repossessions surpassed 1.7 million vehicles last year, the most since 2009. The sudden bankruptcy of primary subprime lender Tricolor drew further attention to lending practices targeting borrowers with limited credit histories, echoing similar concerns noted by investors.
Yet, consistent with trends seen in broader financial market reporting, it remains relatively calm. Demand for asset-backed securities tied to subprime auto loans has stayed firm, supported by tighter underwriting and expectations that easing financial conditions may stabilize performance.
Still, the consumer-level pressure mirrors affordability challenges highlighted in other economic sectors. With average new-car prices recently exceeding $50,000, and deep-subprime interest rates topping 20% on used-vehicle loans, many borrowers owe more than their vehicles are worth. Once behind, fees and interest quickly compound, making it difficult to recover.
The auto-loan market has become a clear barometer for household resilience. Whether improving labor conditions or future rate cuts can reverse these trends will help determine the extent of financial stress facing lower-income Americans in the months ahead.
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