Americans are struggling to keep up with their car payments at unprecedented levels, as the latest data from Fitch Ratings reveals that 6.56 percent of subprime auto borrowers were at least 60 days behind on their loans in January 2025. This marks the highest delinquency rate recorded since the agency began tracking such data in 1994.
The trend underscores the mounting financial strain on consumers as persistent inflation, elevated interest rates, and soaring car prices make it increasingly difficult to stay current on loan obligations. A separate report from the Federal Reserve Bank of New York also indicates that more borrowers are slipping into serious delinquency, with 3 percent of all auto loans becoming 90 days or more past due in the fourth quarter of 2024—the highest level since 2010.
Rising Car Prices and Interest Rates Squeeze Consumers
The cost of purchasing a vehicle has skyrocketed over the past few years. According to Cox Automotive, the average price of a new car has jumped more than $10,000 since the pandemic, climbing from approximately $38,000 in January 2020 to over $48,500 in January 2025.
Coupled with increasing interest rates, the financial burden on car buyers has grown significantly. While the average monthly car loan payment reached a record $795 in December 2022, it has slightly declined to $755 in January 2025. However, this remains substantially higher than the pre-pandemic average of $566 in 2019.
“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,” researchers at the New York Fed stated in their recent report.
Economic Pressures Driving Delinquencies
Several factors are contributing to the surge in missed car payments. Wage growth has struggled to keep pace with inflation, making it more challenging for many Americans to manage their debt obligations. Additionally, lingering effects from pandemic-era financial relief programs have dissipated, leaving borrowers more exposed to economic pressures.
Subprime borrowers—those with lower credit scores who often have fewer financial resources—are being hit the hardest. These borrowers typically face higher interest rates, making their monthly payments even more burdensome. Fitch Ratings’ data shows a sharp rise in delinquencies among this group, reflecting the broader financial instability many low- and middle-income Americans are facing.
Trump’s Tariffs Could Drive Prices Even Higher
A potential new hurdle for car buyers could come in the form of tariffs on auto imports. According to industry analysts, President Donald Trump’s proposed 25 percent tariffs on vehicles and parts could increase car prices by as much as $12,000. While Trump has temporarily exempted Mexico and Canada from these tariffs for one month, any future implementation could further strain both consumers and automakers.
Mexico and Canada are the United States’ top trading partners for motor vehicles and parts, meaning any disruption in imports could lead to even higher costs for American buyers. This would exacerbate the current affordability crisis in the auto market and likely push delinquency rates even higher.
Prime Borrowers Remain Relatively Stable
While subprime borrowers are struggling, individuals with higher credit scores are faring better. In January 2025, only 0.39 percent of prime borrowers were at least 60 days past due on their auto loans, up slightly from 0.35 percent a year earlier. This suggests that while financial challenges are widespread, those with stronger credit profiles and greater financial stability are better equipped to manage rising costs.
Outlook: More Defaults or Relief Ahead?
With interest rates expected to remain high in the near term and vehicle prices showing little sign of significant decline, the auto loan delinquency crisis may persist. Experts warn that without economic relief measures, the situation could worsen, potentially leading to an increase in repossessions and a broader slowdown in the auto industry.
For now, consumers are left navigating a challenging financial landscape, weighing the need for reliable transportation against the rising cost of ownership. Policymakers and industry leaders will need to address these growing concerns to prevent further economic distress among American borrowers.
