Delinquencies on auto loans among subprime borrowers are spiking as consumers continue grappling with higher interest rates
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Car owners are missing their monthly payments at the highest rate in more than 30 years, with 6.56% of subprime auto borrowers at least 60 days past due on their loans in January
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A slowing economy and the ongoing impacts of inflation have made it harder for many consumers to stay current on their bills, with auto loans being a particular pain point
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Delinquencies are expected to continue this year, especially among lower-income individuals, due to the continued impact of higher inflation and interest rates.
Car owners are missing their monthly payments at the highest rate in more than 30 years. In January, the share of subprime auto borrowers at least 60 days past due on their loans rose to 6.56%, the most since the data collection began in 1994, according to Fitch Ratings. A slowing economy and the ongoing impacts of inflation have made it harder for many consumers to stay current on their bills. Auto loans have been a particular pain point, with higher car prices and elevated borrowing costs driving a surge in repossessions. The Federal Reserve Bank of New York recently reported that the share of auto loans among all borrowers that transitioned into serious delinquency — defined as 90 days or more past due — rose to 3% in the fourth quarter, the highest level since 2010.
Americans Fall Behind on Car Payments
The percentage of borrowers at least 60 days late on their car payments is at the highest on record
The latest spike in delinquencies among subprime borrowers comes at a pivotal time for the US economy, as President Donald Trump’s trade wars ignite volatility in the stock market and concerns grow about sluggish economic growth. “The lower income level has been really affected, and we expect that to continue to be the case this year,” said Mike Girard, senior director for asset-backed securities in North America for Fitch. “There’s still the continued impact from higher inflation and interest rates.” Delinquencies typically increase in January and February after the holiday spending period, Girard said. This is usually followed by improvements in March and April as some borrowers use tax refunds to catchup on bills. Fitch defines subprime auto borrowers as those with credit scores of 640 and below. Those with higher scores are faring better — 0.39% of prime borrowers were at least 60 days past due in January, up from 0.35% a year prior. Other economic measures are also showing declining financial health for Americans. Consumer debt recently surged by the most on record, while consumer confidence dropped the most since 2021.
NN: a ominous warning sign of a brewing debt crises. See: