Rise in Late Auto Loan Payments Signals Affordability Challenges in U.S. Vehicle Market

Late auto loan payments are increasing in the United States, reflecting challenges in vehicle affordability, particularly among lower-income households. As of October, 3.88% of auto loans were past due, nearing levels last seen before the 2008 financial crisis. However, repossession rates, while elevated at around 2.3%, remain below Great Recession peaks. The surge in late payments is linked to rising vehicle prices, with average new car loans exceeding $42,000 and monthly payments approaching $748. Used vehicle loans average $27,000 with monthly payments around $532, imposing significant financial strain, especially for families balancing multiple vehicles and other living costs like rent or mortgage payments. Subprime borrowers experience the highest delinquency rates in over 30 years, signaling stress within credit-challenged segments of the population. The proliferation of expensive SUVs and pickups with advanced technologies, coupled with tariffs, limits automakers' ability to offer lower-priced vehicles without incurring losses. Additionally, extended loan terms, often of 73 to 84 months, have become more common as consumers seek manageable monthly payments. Despite these indicators of financial pressure, analysts note that the broader U.S. economy and auto sector remain resilient due to steady consumer spending by higher-income earners and a generally low unemployment rate of 4.4%. Institutions have adapted to the evolving market conditions with improved risk management, and used car values have helped mitigate lender losses on repossessions. Outlooks suggest potential relief for borrowers in 2026, with anticipated interest rate reductions and increased disposable income which may improve loan performance and reduce lender risk aversion