Americans Are Getting Seriously Behind on Car Payments

More and more Americans are falling behind on car payments. Recent loan data reveals borrowers with low credit scores are having a difficult time keeping up.

As of January, roughly 6.5% of subprime auto loans are 60 days past due, which is the highest rate since 1994. According to credit research company Fitch Ratings, consumers with credit scores at 639 or below are considered subprime.

Among borrowers with higher scores, only 0.39% are 60 days delinquent. In January 2024, 0.35% were two months behind.

“American households, especially in the lower to middle-income range, are coming under increasing financial stress,” said Dave Gulley, a Bentley University economics professor, per Quartz. “High new and used car prices, along with higher auto loan rates, have left a record number of car owners with $1,000+ monthly payments.” 

Auto loan provider Ally Financial reported in September 2024 that account delinquencies were higher than the company anticipated. The lender also noted a rise in loan charge-offs, which are accounts that will likely never be repaid.

Blame Inflation for Car Loan Delinquencies and Repossessions

It’s not surprising car payments are falling behind. With years of rising prices in just about every category, consumers are having a hard time making ends meet. Buying groceries and paying rent are taking priority over car payments.

Instead, borrowers are letting their credit take the hit for missed payments, knowing the lender would rather wait than go through the expense and trouble of repossessing a vehicle. For the most part, lenders won’t take back a car until a borrower is more than 90 days behind.

“When you think about the costs for rent and shelter and insurance, all those things hit consumers and they have to choose what they will pay,” Jeremy Robb of Cox Automotive told Bloomberg. “More people are getting behind on payments because everything is more expensive.”

Auto loans that are more than 90 days past due are going up as well, according to recent Fed data. In February, the Federal Reserve Bank of New York reported that loans that were seriously delinquent grew 3% in the last three months of 2024, the highest increase in 15 years.

Despite a lender’s hesitancy to repossess until the last minute, reclamations are happening and are increasing. Midway through 2024, repos jumped 23% compared to the same period in 2023.