Americans Struggling to Make Their Car Payments

In the years since the COVID-19 pandemic, surging sticker prices and shrinking incentives from automakers have led more consumers, especially those with less purchasing power, to buy used cars and take out loans with longer terms.

Now, however, more Americans are falling behind on their loan payments, signaling that lower-income consumers are struggling to afford their automobiles amid stagnant wages and higher unemployment.

The economy has stayed strong, with Wall Street continuing to purchase subprime auto loans, but The Wall Street Journal reported that there are indications that all is not well in the auto market.

J.D. Power said that the share of new-car buyers with credit scores below 650 in September was nearly 14%, or approximately one in seven people — the highest since 2016 for the same period.

The percentage of subprime auto loans that are 60 days or more past due topped 6% this year, according to Fitch Ratings, even as other borrowers' delinquency rates remained relatively unchanged.

Data from industry research firm Cox Automotive reveals that an estimated 1.73 million vehicles were repossessed in 2024, which is the greatest number since 2009.

Economists told The Journal that delinquencies are higher than during the pre-pandemic period but have evened out.

"These are borrowers who may have stretched their budgets to afford a higher price of the asset, as well as a higher payment because of the interest rate," Joelle Scally, an economic policy adviser at the Federal Reserve Bank of New York, said.

Last month's bankruptcy filing of lender Tricolor Holdings, which financed customers with little to no credit history or no Social Security number, underscores the stress some subprime auto borrowers are under. The company, which reportedly has around 100,000 outstanding loans, collapsed due to alleged fraudulent activities and significant financial losses.

Citing aggressive immigration enforcement efforts, S&P Global Ratings analysts recently cautioned investors about several securities backed by auto loans to consumers with little to no credit history.

Investors and analysts told The Journal that the Tricolor collapse appears to be a unique event that is unlikely a harbinger of trouble on the horizon.

Average monthly payments for new cars have reportedly ballooned to more than $750, with nearly 20% of loans and leases now costing more than $1,000 per month.

While auto executives have routinely cited the need to make more affordable cars, partly to avoid losing out to the used vehicle market, they often favor manufacturing trucks and luxury sport-utility vehicles because of the more sizable profits they produce.

"The customer is constrained and under pressure," Michael Lavin, president and chief operating officer of subprime auto-financing firm Consumer Portfolio Services, said at a conference last month.

He added that his company limited its lending this year amid nearly $98 million in outstanding loans — a figure that more than doubled since 2022 — that wound up in repossession in the second quarter of 2025.

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