In October 2025, 6.65% of subprime auto borrowers tracked by Fitch Ratings were at least 60 days behind on their car payments. That is the highest reading in the agency’s dataset, which stretches back to 1994, surpassing even the worst months of the 2008 financial crisis. By early 2026, the fallout is becoming harder to ignore: repossessions are climbing, loan terms keep stretching longer, and the average monthly payment on a new vehicle has reached roughly $767, according to Edmunds transaction data.
For the millions of Americans who need a car to hold down a job, get their kids to school, or reach a grocery store, those numbers are not abstract. They describe a market where the cost of driving has outpaced what many households can absorb.
The record in context
The Fitch data tracks asset-backed securities tied to subprime auto loans, meaning the 6.65% figure reflects loans that lenders have bundled and sold to investors. These securitized pools tend to skew toward riskier borrowers, so the number does not represent every subprime auto loan in the country. But Fitch has measured this slice of the market the same way for more than three decades, and the trendline is stark: delinquencies have been rising steadily since 2021 and broke through the previous record set during the Great Recession.
The broader auto debt picture adds scale. According to the Federal Reserve Bank of New York’s Household Debt and Credit Report, total U.S. auto loan balances stood at roughly $1.64 trillion as of late 2024, making car debt the third-largest consumer liability after mortgages and student loans. Subprime borrowers, generally defined as those with credit scores below 620, account for a meaningful share of that total, and their loans carry interest rates that frequently exceed 10% and sometimes top 20%.
Why the subprime pool has gotten riskier
Part of the explanation lies in who counts as “subprime” today. Federal Reserve researchers examined this question in a January 2024 analysis of credit score migration. They found that a growing number of consumers who once held prime scores have slid into subprime territory, often carrying larger existing debts and more complex financial obligations than traditional subprime borrowers. When these higher-balance borrowers enter the subprime category, they raise the average risk level of the entire group, pushing delinquency rates higher even if lenders are not writing significantly more new subprime loans.
At the same time, the loans themselves have changed. To keep monthly payments within reach as vehicle prices surged during and after the pandemic, lenders extended average loan terms well beyond the once-standard five years. Loans of 72 months are now common, and terms of 84 months are not unusual. Longer terms mean borrowers spend more time owing more than their car is worth, a condition known as negative equity, which makes it harder to sell or trade in a vehicle when money gets tight.
The role of nonbank lenders
Not all subprime auto lenders are created equal. The Consumer Financial Protection Bureau published detailed research showing that nonbank finance companies originate a large share of subprime auto loans and consistently see worse repayment outcomes than traditional banks. Default and repossession rates run higher at these lenders, and the CFPB tied the gap to differences in underwriting standards, loan structures, and dealer compensation arrangements that can steer borrowers into larger loans or higher rates than their credit profiles alone would dictate.
These nonbank lenders are also the primary issuers of the asset-backed securities that Fitch tracks. That means the record 6.65% delinquency rate is, in part, a reflection of the lending practices that dominate this corner of the market. Borrowers who end up in these securitized pools are often paying the steepest rates on the longest terms for vehicles that depreciate faster than the loan balance shrinks.
What is pushing borrowers over the edge
The record delinquency rate did not appear overnight. Several forces have been compounding for years.
Vehicle prices spiked during the pandemic-era chip shortage and have been slow to retreat. Even as new-car inventory recovered through 2024 and into 2025, sticker prices remained elevated, and used-car values, while off their 2022 peaks, stayed well above pre-pandemic norms. For a subprime buyer with limited negotiating power and fewer financing options, that translates directly into a bigger loan.
Interest rates added another layer. The Federal Reserve’s rate-hiking cycle, which began in March 2022 and pushed the federal funds rate to a range of 5.25% to 5.50% by mid-2023, filtered into auto lending with a lag. Subprime borrowers, who already pay a premium for credit, saw their rates climb further. Even after the Fed began easing in late 2024, rates on subprime auto loans remained historically high through early 2026.
Meanwhile, the everyday costs that compete with a car payment have not eased much. Grocery prices, insurance premiums, and rent have all risen faster than wages for many lower-income households. When the budget is already stretched, a car payment north of $500 or $600 a month on a used vehicle, or $767 on a new one, can become the bill that slips.
Repossessions and the downstream effects
Rising delinquencies eventually lead to rising repossessions, and that process is already underway. Industry data from Cox Automotive showed repossession volumes climbing through 2024 and into 2025, though they had not yet reached the levels seen after the 2008 crash. For borrowers, losing a car often triggers a cascade: missed shifts at work, lost income, damaged credit that makes the next loan even more expensive, and in some cases, job loss.
For investors holding subprime auto ABS, higher delinquencies mean lower recoveries and potential losses on the riskiest tranches of those deals. That has not triggered broader financial contagion, in part because the subprime auto ABS market is far smaller than the mortgage-backed securities market was in 2007. But it has made investors more cautious, which could tighten the supply of credit for the borrowers who need it most.
What borrowers and buyers should know
None of this means the auto lending market is about to collapse. Prime borrowers, who make up the majority of outstanding auto loans, are performing far better, and overall auto loan delinquency rates, while elevated, remain well below crisis levels. The stress is concentrated among borrowers with the weakest credit and the least financial cushion.
For anyone shopping for a car in this environment, a few realities are worth keeping in mind. Loan terms beyond 60 months may lower the monthly payment but dramatically increase the total interest paid and the risk of negative equity. A pre-approval from a bank or credit union before visiting a dealership can provide leverage against higher-rate offers from the dealer’s finance office. And for buyers whose credit scores have slipped, it may be worth delaying a purchase, if possible, to rebuild credit rather than locking in a rate above 15% on a depreciating asset.
The 6.65% delinquency record is a signal, not a verdict. It tells us that a specific and vulnerable group of borrowers is under more financial pressure than at any point in at least 32 years. Whether that pressure eases will depend on where interest rates, vehicle prices, and household incomes go from here. As of mid-2026, the trajectory on all three remains uncertain.
