Car Loan Delinquencies Surge: Is the Automotive Affordability Crisis Here to Stay?
Washington D.C.- A concerning trend is emerging in the automotive finance sector: a substantial increase in the number of Americans falling behind on their car payments. New data indicates that car loans are rapidly transitioning from one of the most secure forms of consumer debt to one of the riskiest, with delinquencies spiking more than 50% over the last fifteen years.
The Rising Tide of Delinquencies
VantageScore, a leading credit-scoring company, reports that consumers across all income brackets are struggling to meet their monthly auto loan obligations. Delinquencies,defined as payments 60 or more days past due,have climbed considerably,reaching 1.6% of all auto loans as of July 2025. This is a stark contrast to credit cards and first mortgage loans, which currently have delinquency rates below 1%.
Approximately 16 million new cars were purchased in the United States last year, with the vast majority financed. Considering there are nearly 300 million vehicles on American roads, this trend poses a broad financial risk.
Double-Edged Sword: Price and Interest Rates
Experts attribute this surge to a confluence of factors, primarily soaring vehicle prices and escalating interest rates. As 2019, the average price of a new car has jumped over 25%, now exceeding $50,000. Together, interest rates on new car loans have risen above 9%, creating a “double whammy” for borrowers, according to Rikard Bandebo, Chief Economist at vantagescore.
The situation is further complicated by the fact that monthly car payments are increasing at a faster rate than mortgage payments. This puts a significant strain on household budgets,forcing consumers to make difficult financial choices.
Beyond Subprime: A Crisis Affecting All Income Levels
contrary to previous patterns,the increase in delinquencies isn’t limited to borrowers with poor credit. Prime and near-prime borrowers-those with good credit scores-are now missing payments at a faster rate than subprime consumers.This is largely due to lenders tightening financing criteria for lower-tier borrowers three years ago.
“The higher income you have, you tend to at least feel that you can own a more expensive car,” Bandebo observed, suggesting that even affluent individuals are feeling the pinch of increasing automotive costs.
The Lengthening Loan Terms and “Upside-Down” Loans
To make monthly payments more manageable, many car buyers are opting for longer loan terms, often extending to seven years or more. though, this strategy creates a growing number of “upside-down” loans, where the borrower owes more on the vehicle than it’s currently worth.
| Metric | 2010 | 2025 (July) | Change |
|---|---|---|---|
| Auto Loan Delinquency Rate (60+ days past due) | 0.9% | 1.6% | +77.8% |
| Average New Car Price | $28,000 (approx.) | $50,000+ | +78.6% |
| Average Auto Loan Interest Rate | 4.5% (approx.) | 9%+ | +100% |
This trend is unlikely to reverse course anytime soon, as American consumers continue to favor larger, more expensive vehicles, and automakers are reducing the availability of affordable models.
“Consumers now are in a more precarious position than they’ve been sence the last recession,” Bandebo warned.”It’s looking like that trend is going to continue into next year.”
Navigating the Automotive Affordability Crisis
As the affordability crisis in the auto market deepens, consumers are encouraged to carefully evaluate their finances before taking on a car loan. Considering a used vehicle, saving for a larger down payment, and exploring alternative transportation options can definitely help mitigate the risk of falling behind on payments. it is also crucial to shop around for the best interest rates and loan terms.
frequently Asked questions About Car Loan Delinquencies
Are you concerned about the rising cost of car ownership? What steps are you taking to manage your automotive expenses?
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