Late car payments rise to highest level in over 30 years

Missed payments on auto loans by American car owners rose to the highest level in three decades earlier this year.

The percentage of borrowers with subprime car loans who are at least 60 days past due on their loans increased to 6.56% in January, which was the highest level since data collection began in 1994, according to Fitch Ratings.

The share of 60 days past due subprime auto loan borrowers has remained above 6% since August 2024 after breaking the 6% threshold for the first time early last year. It previously approached the 6% mark in 1996, 2019 and 2023.

The increase in the number of borrowers struggling with auto loans comes as consumers continue to struggle with the impact of the inflationary pressures the U.S. economy has experienced in recent years, which have strained Americans’ household budgets. Higher interest rates aimed at bringing inflation down also made new auto loans more expensive for borrowers.

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A recent analysis by the Federal Reserve Bank of New York found that auto loan balances have grown steadily since 2011 and increased by $48 billion in 2024 due to an inflow of newly originated auto loans.

“Nearly all borrower groups have seen delinquency rates rise beyond their pre-pandemic levels,” the NY Fed wrote. It noted that borrowers with credit scores between 620 and 679 saw their likelihood of becoming delinquent in a given quarter rise from about 2% before the pandemic to 4% in 2024.

The report found that consumers are “in pretty good shape in terms of the household debt landscape” with stable balances and solid performance in mortgage loans – but noted issues with auto loans.

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“However, for auto loans, higher car prices combined with higher interest rates have driven monthly payments upward and have put pressure on consumers across the income and credit score spectrum,” the NY Fed explained.

“The episode of rapidly rising car prices has had heterogenous impacts on borrowers, who have shifted between used and new cars as well as between loans and leases. These shifts have put additional pressure on lower-income and lower-credit-score borrowers who may have had to opt for higher-priced used cars over the last few years,” the economists wrote. 

“Used car prices have since declined from the peak, potentially leaving some borrowers underwater on those vehicles and creating potential repayment challenges,” they noted.

The New York Fed reported in February that among all borrowers of auto loans, the share of borrowers who entered serious delinquency with payments at least 90 days past due increased to 3% in the fourth quarter of 2024, which was the highest level since 2010.