Subprime Auto Loan Delinquencies Hit Their Highest Level Since the 1990s as 1.73 Million Americans Had Their Cars Repossessed Last Year

The American auto loan market is flashing warning signs that have not been this alarming since Bill Clinton was in the White House. Fitch Ratings reported this week that 6.65% of subprime auto borrowers are now at least 60 days late on their car payments, a delinquency rate not seen since the 1990s. The broader picture is equally disturbing: total delinquent auto loan balances have exceeded $60 billion, vehicle repossessions surged to 1.73 million last year (the most since 2009), and the Federal Reserve's own data shows that 15.78% of subprime auto loans were at least 30 days past due as of the most recent reporting period.

This is not a crisis that arrived overnight. It has been building for years, fueled by a combination of vehicle price inflation that far outpaced wage growth, interest rates that punish the borrowers who can least afford it, and a lending ecosystem that continued extending credit to high-risk borrowers long after the math stopped making sense.

The Affordability Trap

The numbers reveal a market that has become fundamentally unaffordable for a significant portion of the population. According to Experian, the average monthly payment on a new car loan reached $742 in the fourth quarter of 2025. For used cars, the average sits at $536. Those are national averages. For subprime and deep subprime borrowers, the picture is dramatically worse.

A borrower with deep subprime credit is paying an average interest rate of 21.55% on a used car loan, according to Bankrate data. Compare that to 7.41% for a borrower with excellent credit. The math is punishing: on a $30,000 used vehicle financed over 72 months, a deep subprime borrower will pay approximately $24,000 in interest alone, nearly doubling the total cost of the car. That same loan for a prime borrower carries about $7,200 in interest costs.

The gap between what Americans need to earn to comfortably afford a car payment and what many of them actually take home has become a chasm. Financial advisors generally recommend spending no more than 10-15% of monthly income on transportation. For a subprime borrower making $3,500 per month and carrying a $536 car payment, that single obligation consumes more than 15% of gross income before factoring in insurance, gas, and maintenance.

Why Repossessions Are Surging

The 1.73 million vehicle repossessions recorded in 2025 represent a 23% increase from 2023 levels and the highest annual total since the aftermath of the Great Recession. Industry analysts point to several converging factors.

First, the pandemic-era forbearance programs and stimulus payments that kept many marginal borrowers current have fully expired. Second, the vehicles purchased during the 2021-2022 price spike, when used car values reached historically inflated levels, are now deeply underwater. A borrower who financed a 2019 Honda Civic for $28,000 in 2022 may owe $22,000 on a vehicle now worth $14,000. When financial pressure arrives, there is no good option: they cannot sell the car without writing a check, and they cannot refinance because there is no equity to support a new loan.

"We are seeing a generation of auto borrowers who were sold cars they could not afford, at prices that did not reflect reality, with loan terms that were designed to make monthly payments look manageable while obscuring the true cost. The bill is coming due."

Consumer finance analyst reviewing auto lending trends

The Student Loan Connection

A lesser-known but increasingly important factor is the distortion that student loan delinquencies have introduced into the auto lending market. When the federal government resumed student loan collections in late 2024, millions of borrowers saw their credit scores drop as missed payments hit their records. This pushed a significant number of previously near-prime borrowers into subprime territory, not because their auto loan behavior changed, but because their overall credit profile deteriorated.

The result is a subprime auto loan pool that is larger, more stressed, and more correlated with other forms of consumer debt than at any point in recent history. Auto lenders are responding by tightening underwriting standards, which has the perverse effect of cutting off credit to the very borrowers who need vehicles most to maintain their employment and income.

What It Means for the Broader Economy

Auto loans are often described as one of the last bills Americans will let go delinquent, because losing a car means losing the ability to get to work. When auto delinquencies spike, it signals that borrowers have already exhausted their other options. Credit cards have been maxed out. Savings have been depleted. The car payment is the last domino, and when it falls, the consequences cascade.

Bloomberg reported on February 10 that overall US consumer delinquencies have jumped to their highest level in nearly a decade. Auto loans are the leading edge of that trend, but they are not alone. Credit card delinquencies, personal loan defaults, and buy-now-pay-later missed payments are all elevated. The picture that emerges is of an American consumer who is still spending, still participating in the economy, but doing so on increasingly fragile financial footing.

What Borrowers Can Do

For borrowers who are struggling with auto loan payments, the window to act is before a repossession, not after. Contacting the lender to discuss hardship options, refinancing with a credit union that may offer lower rates, or voluntarily surrendering the vehicle to avoid the additional costs of involuntary repossession are all preferable to letting the situation deteriorate. Consumer advocates also recommend checking whether any state-level protections or assistance programs apply, particularly for borrowers who may have been subjected to predatory lending practices.

The broader lesson is one the American financial system has been slow to learn: affordable transportation is not a luxury. It is the infrastructure on which employment, income, and economic participation depend. When 1.73 million people lose their vehicles in a single year, the consequences ripple outward in ways that no delinquency statistic can fully capture.